Norwegian Air sets big discount for share sale
By selling new shares far below the current market price, Norwegian will boost the value of each of the purchasing rights
Oslo — Norwegian Air will sell new shares at just a third of the current market price when the loss-making airline seeks to raise money from its owners in the next few weeks, it said on Monday.
Norwegian Air said on January 29 it planned to raise 3-billion Norwegian krone ($348m) in a share sale to bolster its finances, just days after British Airways owner IAG ruled out a bid for the budget airline.
Norwegian is trying to replicate in transatlantic flights the low-cost model that dominates the short-haul market via companies such as Ryanair and easyJet, but is struggling to make the business profitable.
The European airline sector is struggling with overcapacity and high fuel costs, with several companies going out of business, the latest being British budget airline Flybmi, which filed for bankruptcy on Sunday.
In the rights issue, Norwegian’s shareholders will get two subscription rights to buy shares for every share they own, and new shares will be sold at 33 krone each, compared with Friday’s closing price of 97.34 krone.
By selling new shares far below the current market price, Norwegian will boost the value of each of the purchasing rights, which can in turn be bought and sold.
The company’s shares fell as much as 15% to a six-and-a-half-year low of 83 krone on Monday, before paring losses to trade down 8.8% at 88.8 krone in afternoon trade, valuing the business at about 4-billion krone.
“Based on the [Friday] closing price, the theoretical value of each subscription right is 21.45 krone and the theoretical value of the two subscription rights received per existing share is 42.90 krone,” Norwegian said in a statement.
“Shareholders must decide whether to exercise or sell their subscription rights, or a combination thereof, to maintain the full value of the shareholding,” it added.
Earlier on Monday, Norwegian’s CEO and the board chair said they would sell some of their subscription rights to other investors, in a move that would reduce the 24.66% stake they hold in the airline.
HBK, the vehicle through which the chair, CEO and their families own their stake, "has agreed to sell the subscription rights at a price of 70% of the theoretical value of the subscription rights at the time of pricing of the rights issue”, HBK said in a statement. It did not say who would buy those rights.
Norwegian said in January that billionaire investor John Fredriksen was among those who had agreed to take part in its share issue.