SAS Scandinavian Airlines (SK, Copenhagen Kastrup) parent SAS Group has entered into an agreement with New York-based private equity firm Apollo Global Management to raise USD700 million in financing to help it complete its Chapter 11 restructuring process.

The airline said in a statement on August 14 that it anticipated receiving court approval for the debtor-in-possession (DIP) financing by mid-September and that it aims to exit Chapter 11 within nine to 12 months.

Struggling with a crippling debt burden, the carrier filed for the process on July 5 as a part of its SAS Forward transformation plan, promising no impact on its operations or financial obligations. But the collapse of wage talks between the airline and its pilots prompted a costly 15-day strike that added to its travails.

DIP bridge financing has been used in the aviation sector in recent years in particular among Latin American carriers such as Avianca Holdings, Grupo Aeroméxico, and LATAM Airlines Group as they negotiated their own chapter 11 processes. SAS chief executive Anko van der Werff is himself familiar with it in relation to Avianca in 2020, while Apollo provided DIP funding to Aeroméxico that same year.

With the delayed-draw term loan to SAS, Apollo could eventually become a major SAS shareholder once the USD3 billion restructuring is complete, a financial source told Bloomberg News, as its loan comes with a fee for the carrier.

The DIP financing has a nine-month maturity from the closing date but this can be extended up to an 18-month term. SAS said it had selected Apollo’s DIP proposal “following a competitive process and considers the terms of the DIP financing to be on market terms.”

USD350 million of the USD700 million will be available following the court’s approval, while the rest “will be available upon the satisfaction of certain other conditions precedent under the DIP Term Loan Agreement,” SAS said. New York restructuring specialists Kroll Restructuring Administration, which SAS appointed as its US claims agent, has announced that a creditors’ meeting will be held on August 18 at 1300L (1700Z).

In its docket is listed a Stipulation and Order authorising the debtors - SAS - to reject an unexpired lease with a lessor. The document testifies that IC Airlease One Limited and SAS had agreed to the rejection of a contract for A321-200 LN-RKK (msn 1848), together with two International Aero Engines V2530-A5 engines. The operating lease was signed on September 29, 2016, and terminated on June 28, 2022, with the lessor issuing a waiver letter on July 4.