SAS Files for Chapter 11 Bankruptcy in the United States

SAS AB (“SAS”) announces that it is taking the next step in SAS FORWARD’s global business transformation plan. To proceed with the implementation of key elements of the plan, SAS and certain of its subsidiaries have voluntarily filed for Chapter 11 in the United States, a statutory financial restructuring proceeding conducted under the supervision of a US federal court. SAS’s operations and flight schedule are unaffected by the Chapter 11 filing, and SAS will continue to serve customers as normal, although the SAS Scandinavia pilot union strike is impacting the flight schedule. The Company expects to meet its future short-term business obligations. SAS’s cash balance was SEK 7.8 billion as of June 30, 2022. The strike is having a negative impact on the Company’s liquidity and financial condition and, if prolonged, this impact could become material. The Company is in well-advanced discussions with a number of potential lenders to secure additional debtor-in-possession financing of up to USD 700 million (equivalent to approximately SEK 7.0 billion), to support its operations throughout throughout this court-supervised process. . Debtor-in-possession financing is a specialized type of bridge financing for businesses that are restructuring through a Chapter 11 process.

SAS and certain of its subsidiaries today filed voluntary petitions under Chapter 11 of the US Bankruptcy Code with the US Bankruptcy Court for the Southern District of New York, USA. The purpose of the filing is to accelerate SAS’s transformation by implementing the key elements of its SAS FORWARD plan. These actions are consistent with SAS’ announcement on May 31, 2022, that SAS FORWARD involves complex multi-party negotiations and that the Company may seek to utilize one or more in-court restructuring proceedings designed to assist in the resolution of the financial difficulties of SAS and help accelerate the implementation of SAS FORWARD.

Chapter 11 is a well-established and flexible legal framework for corporate restructuring operating in multiple jurisdictions, and has been used by a number of major international airlines to restructure. Through this process, SAS aims to reach agreements with key stakeholders, restructure the company’s debt obligations, reconfigure its aircraft fleet and emerge with a significant injection of capital. SAS expects to complete its supervised court process in the United States in 9-12 months.

“We have worked closely with the SAS management team to move SAS FORWARD forward. As part of this process, SAS has also prepared for the option of using in-court restructuring proceedings to remedy the the Company’s financial situation. The ongoing strike poses significant challenges to our ability to successfully complete our transformation. The Board of Directors has concluded that legal tools are necessary to progress in our ongoing negotiations with key stakeholders and, ultimately, to succeed in making SAS a competitive and financially sound company.The process we have begun will enable SAS to continue its 75+ year legacy as an integral part of Scandinavian infrastructure and society. We are confident that the actions we are taking will strengthen SAS’s ability to seize the significant opportunities ahead as the industry continues to recover from the pandemic,” said Carsten Dilling, Chairman of the Board of SAS.

Anko van der Werff, Chairman and CEO of SAS, said: “Over the past few months, we have worked hard to improve our cost structure and improve our financial position. We are making progress, but there is still a lot of work to do and the ongoing strike has made an already difficult situation even more difficult. The Chapter 11 process gives us legal tools to accelerate our transformation, while being able to continue operating as usual. We will continue to rebuild the network connectivity, products and services that our customers have come to expect, and we will continue to do so throughout this process and beyond. I am convinced that this process will enable us to become an even better airline for our customers and a stronger business partner in the years to come. Becoming a more competitive airline will require the effort of the whole team and the sharing of the burden by all stakeholders. We urge the SAS Scandinavia pilot unions to end their strike and engage constructively in this process.

Strengthening SAS’s ability to deliver on SAS FORWARD

SAS FORWARD was launched to ensure SAS’s long-term competitiveness in the global aviation industry through a comprehensive transformation of its business. The plan aims to strengthen SAS’s financial position and achieve a sustainable cost structure with an annual cost reduction of approximately SEK 7.5 billion. The plan also includes raising at least SEK 9.5 billion of new equity as well as reducing or converting more than SEK 20 billion of debt into ordinary shares (the majority of which is on-balance sheet debt), including government hybrid bonds, commercial hybrid bonds, Swiss bonds, government term loans, aircraft lease obligations and contractual maintenance obligations and other enforceable contractual obligations.

SAS has made progress in these efforts, having identified the vast majority of SEK 7.5 billion in annual cost savings, continued to invest in its digital capabilities and sustainability efforts, and has received support from Swedish governments, Danish and Norwegian. The Company also met with potential investors and actively engaged with multiple stakeholders to improve its overall financial strength. The Chapter 11 process aims to accelerate the process of transformation.

The reduction or conversion of public debt is subject to the approval of the European Commission and the EFTA Surveillance Authority, respectively, in accordance with the applicable State aid rules. As previously announced, much of the new equity should be sought from new investors. The planned reductions or conversions of debt to equity and the issuance of new shares are expected to result in substantial dilution for existing shareholders. Any issue of new shares will be subject to the approval of the general meeting as well as regulatory approvals.

Business Operations Unaffected – Continue to Serve Customers

SAS’s operations and flight schedule are unaffected by the Chapter 11 filing, and its board of directors and management continue to be in charge of the company’s affairs. Reservations, customer service, SAS EuroBonus and all other SAS customer services and systems will continue as normal. Independently of the Chapter 11 process, the strike undertaken by the SAS Scandinavian pilot unions will have an impact on the flight schedule.

SAS will continue to issue ticket refunds and honor travel coupons and payments or credits associated with baggage or service claims in accordance with its current policies.

Compliance with commercial obligations

SAS’s assessment is that it has sufficient liquidity, including SEK 7.8 billion in cash as of June 30, 2022, to meet its short-term business obligations. The strike has a negative impact on the Company’s liquidity and financial situation and, if prolonged, this impact could become significant. In order to ensure that the Company has sufficient funds to complete its restructuring, the Company is in well-advanced discussions with a number of potential lenders with a view to securing additional debtor-in-possession (“DIP”) financing of up to USD 700 million (equivalent to approximately SEK 7.0 billion) to support its operations. DIP financing is a specialized type of bridge financing for companies that are restructuring through a Chapter 11 process, subject to certain prerequisites to access all of these commitments.

As is generally the case in Chapter 11 proceedings, the Company has filed a number of common motions seeking court permission to continue supporting its business operations during the court-supervised process, including the continuous payment of salaries and employee benefits without interruption. As part of these motions, the Company sought leave from the Court to continue honoring its client programs in the ordinary course. SAS also requested permission to honor various pre-petition obligations owed to some of its critical travel agency partners, vendors and suppliers prior to the filing date. The Company will pay all vendors and suppliers on normal terms for goods and services provided from the date of filing.

The Company expects these motions to be heard at a “day one” hearing, which is expected to be held in the coming days. SAS expects to receive court approval for all of its claims.

Information about the Chapter 11 process and additional resources

The Chapter 11 restructuring process in the United States is different from a bankruptcy or administrative proceeding in other parts of the world. The process provides the company with the time and flexibility to reorganize its capital structure, reduce costs and complete a financial restructuring under the supervision of the US court system. The Board of Directors and management continue to run the Company and the restructuring process is overseen by a US federal court. Many companies, including a number of major international airlines based outside the United States, have used the Chapter 11 process to reorganize their financial obligations and become stronger organizations.

July 5, 2022 7:45 a.m.

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