Norwegian faces a €250m bond repayment in December
Norwegian faces a €250m bond repayment in December © Bloomberg

Norwegian Air is to sell its stake in its profitable bank subsidiary as the embattled low-cost carrier seeks to shore up its finances ahead of a crucial winter.

The airline on Monday said it had agreed to sell its 17.5 per cent shareholding in Norwegian Finans Holding, owner of Bank Norwegian, for NKr2.2bn ($245m) to a consortium of Swedish private equity firm Nordic Capital and Finnish insurer Sampo, sending its shares sharply higher.

Norwegian faces a €250m bond repayment in December as well as now-annual worries from analysts and investors about whether it can survive the winter, a perennially difficult time for airlines as fewer people travel in Europe and the US.

Last winter Norwegian, Europe’s third-largest low-cost carrier, was forced to alter its strategy after a period of rapid expansion left investors worried about its stretched finances.

The airline launched an emergency rights issue in January to raise fresh capital and then changed both its long-serving chief executive and chairman, whose joint company remains Norwegian’s leading shareholder. It has also abandoned some of its transatlantic routes after conceding they were costing it too much money.

Analysts and shareholders were divided over the sale of Norwegian Finans at NKr68 per share, a premium of 15 per cent over Friday’s closing price. Some were happy Norwegian was finally concentrating on profitability but others believed it could have made more money from the deal.

Investor Jan Petter Sissener told Norwegian daily Dagens Naeringsliv that while Norwegian needed cash, “it’s a better price for the buyer than the seller”.

Norwegian Finans shares have almost halved in the past year just as the low-cost airline’s have fallen by three-quarters.

Geir Karlsen, Norwegian’s finance director and acting chief executive, said: “The sale of the NoFi shares is part of Norwegian’s strategy to strengthen our core airline operations and focus on the transition from growth to profitability.”

Norwegian should see an increase in net cash of NKr934m from the transaction, which will take place in two stages because of the need for regulatory approval. If the deal goes ahead as planned, Nordic Capital would own 11.1 per cent of Norwegian Finans and Sampo 6.3 per cent.

Norwegian executives also hinted on Monday at more financial activity before the December bond payment, saying it could sell more than 100 aircraft, many of which it bought at relatively attractive prices.

Norwegian shares were up 5 per cent at NKr33.18 after gaining as much as 15 per cent initially on news of the stake sale.

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