Le billet of Monocle

SAS enters turbulence

05 July 2022

This week we talk about SAS Airlines, the Scandinavian airline.  Action… SAS proposed a restructuring plan last February, following the effects of the covid. The objective: to discuss with the creditors and find an agreement to save the group's skin.After a month of negotiations, the pilots were not convinced and yesterday launched a strike that could affect 50% of the flights of the summer season....ReactionSAS announced this morning that it is filing for bankruptcy protection in the US.In the US, bankruptcy law is defined in 2 "chapters":- Chapter 7, which governs the bankruptcy and liquidation of the company (cessation of activity and sale of assets),- and Chapter 11, which allows companies to reorganise and put in place a restructuring plan (maintenance of the activity under the control of the court, renegotiation of debts, etc.)SAS opted for Chapter 11. Objective: to restructure the group while keeping the planes flying. The aim is to increase the company's capital by almost SEK 10 billion (Swedish krona, the local currency). If you want to attract investors, you have to clean up your act a bit.Our position- Two states in the capital (Sweden and Denmark, which hold 44% of the company) and soon three (Norway has agreed to have its debt converted into shares). Probability that the Scandinavian flagship will end up in liquidation: very low.- A gradual but solid recovery in air traffic (1.8 million passengers in May 2022, compared to barely 400,000 over the same period one year ago).- A proposed capital increase that would give the CFO a breath of fresh air- And an ambitious cost-cutting programme (this argument appeals a little less to the pilots...)ConclusionSAS has 120 days to propose a restructuring plan with the agreement of its main creditors.In the meantime, the debt is valued at 34% of par. This means that for a loan of SEK 100 (with SEK 4 interest paid each year), investors think they can only get SEK 34 back.The market is therefore betting on a liquidation scenario. This is not the case for us.We have just increased our investment to 3% of the fund.Stay tuned.Have a great week,Pierre

Disclaimer

This presentation is a promotional document. The content of this document is communicated by and is the property of Monocle Asset Management. Monocle Asset Management is a portfolio management company approved by the Autorité des Marchés Financiers under number GP-20000040 and registered with the ORIAS as an insurance broker under number 10058146. No information contained in this document should be construed as having any contractual value. This document is produced for information purposes only. The prospects mentioned are subject to change and do not constitute a commitment or a guarantee. Access to the products and services presented here may be subject to restrictions for certain persons or countries. Tax treatment depends on individual circumstances. The fund mentioned in this document (Monocle Fund SICAV) is authorized for marketing in France and possibly in other countries where the law permits. Before making any investment, it is advisable to check whether the investor is legally entitled to subscribe to the fund. The risks, costs and recommended investment period of the funds presented are described in the KIDD (key investor information documents) and the prospectus, available free of charge from Monocle Asset Management and on the website. The KIDD must be given to the subscribers before the subscription. Past performances are not a reliable indicator of future performances. Monocle Asset Management cannot be held responsible for any decision taken or not taken on the basis of information contained in this document, nor for the use that could be made by a third party. The investor may lose all or part of the amount of capital invested, as the funds are not capital guaranteed.

To unsubscribe or for any information request, you can email us at monocle@monocle.lu

Fermer

How to invest?

Important à savoir