SAS Scandinavian Airlines (SK, Copenhagen Kastrup) admitted in a statement on July 10 that it had cancelled meetings on proposed conversions of a bond and hybrid notes into shares, which are a key part of its planned recapitalisation.

As previously reported, the company had included in its SEK14.25 billion kronor (USD1.5 billion) plan, the conversion into common shares of both a SEK2.25 billion (USD242 billion) bond due in November 2022 and SEK1.5 billion (USD161 billion) worth of existing hybrid notes.

Meetings had been scheduled for July 17, the statement said, but “SAS has concluded that the majority required for the respective conversions cannot be expected to be obtained,” a presumption it had made based on information provided by Intertrust, the agent for the holders of the bond and the notes.

Capital injections by the governments of Sweden and Denmark, the company's top shareholders, are conditional on the conversions taking place.

“This condition remains an important cornerstone of the recapitalisation plan,” and now SAS “will seek to enter into discussions with representatives of the holders of the bonds and the existing hybrid notes in order to find a solution that satisfies this condition and is satisfactory to the European Commission,” the statement added.

“This was a bad start for the recapitalisation plan,” Norwegian aviation analyst Hans Jørgen Elnæs told the online business newspaper E24 Næringsliv.

The main reason for the bondholders rejecting the plan as it stands, he suspected, was that the conversion rate was not satisfactory and that SAS must come up with a new offer. The bondholders may yet agree to a sweetened plan before SAS shareholders approve it at an extraordinary general meeting at the end of August.