Norwegian has unveiled plans to strengthen its balance sheet by converting debt to equity in order to meet the requirements of the Norwegian state guarantee program.

The low-cost airline hopes to create a sustainable platform taking into account current shareholders and creditors alike.

The company reported in February that it was targeting a net profit for 2020 after taking significant actions in 2019 to optimise the route network, cut costs and create financial headroom.

However, the guidance was withdrawn in a stock market notice on March 6th due to the drop in demand and government-imposed restrictions on travel following the Covid-19 outbreak.

Norwegian has already enacted a number of measures to mitigate the substantial drop in revenues, including grounding the majority of the fleet temporarily.

Having already secured the first tranche of government support, the airline is now seeking to reconfigure its finances in order to access further support.

The board is proposing actions and implementations that aim to fulfil the requirements of the second and third tranches of the Norwegian government state guarantee program that will release NOK 3 billion in total funding.

The proposal aims to convert debt to equity by key stakeholders including aircraft lessors, bond holders, convertible bond holders, and suppliers through the following steps:

• Parts of the Norwegian group’s liabilities towards lessors, banks and other creditors to be converted to shares in the company.
• The use of other financial instruments to convert any relevant debt to equity or equity-like instruments.
• All or part of its bonds to be converted to shares in the company.