Apollo cleared to lend US$700m to bankrupt airline SAS in ‘unusual’ deal

US BANKRUPTCY Judge Michael Wiles on Friday (Sep 9) approved a US$700 million financing package for SAS from Apollo Global Management, though he said features of the deal concern him. 

The financing, divided into 2 US$350 million draws, will allow Apollo to convert the debt into stock in the bankrupt airline or participate in an equity raise tied to SAS’ eventual exit from Chapter 11 protection under certain circumstances. Wiles called the financing “unusual” and questioned whether it was legally viable. 

“I will approve the arrangement, although not without some significant reservations,” Wiles said in a hearing held by telephone Friday. “To be honest, I still have some misgivings about the whole idea.”

Wiles said the structure is akin to SAS selling options on stock that does not yet exist, a concept he found legally murky. While questioning SAS advisers in court, he asked whether the deal might dissuade potential suitors for the airline from making proposals that would ultimately be better for the company’s creditors. 

Lawyers and bankers for SAS emphasised that the airline has the ability to terminate Apollo’s options by paying fees to the asset manager. They also argued that the deal is a substantially cheaper way to finance its operations than a standard loan arrangement and is allowed under bankruptcy rules. 

“I’m not going to, in the abstract and on abstract principles, refuse to approve this,” Wiles said. “I note that I have no objections before me.”

SEE ALSO

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SAS filed for bankruptcy in July, succumbing to a heavy debt load and dwindling cash in the wake of the pandemic. BLOOMBERG