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SAS Announces Revised Recapitalization Plan

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Scandinavian Airlines 195 87 Stockholm Telephone: +46 8-797 0000 Fax: +46 8-797 1515 www.sasgroup.net Not for release, publication or distribution, directly or indirectly, in or into the United States, Canada, Japan, Australia or any other jurisdiction where such action would be unlawful. SAS announces revised recapitalization plan SAS AB (“SAS” or the “Company”) announced on 30 June 2020 a recapitalization plan to tackle the effects of the COVID-19 pandemic (the “Initial Recapitalization Plan”). Following the announcement on 7 August 2020 that SAS has reached an agreement in principle with holders of the existing hybrid notes and bonds, the Board of Directors of SAS (the “Board”) has decided to amend parts of the Initial Recapitalization Plan, including the time plan for the implementation, and has therefore approved a revised recapitalization plan (the “Revised Recapitalization Plan”). The Revised Recapitalization Plan is supported by the Company’s two largest shareholders, the governments of Sweden and Denmark (jointly the “Major Shareholders”), and the third largest shareholder, the Knut and Alice Wallenberg Foundation (“KAW”). As set out in SAS’ announcement on 7 August 2020, the revision of the recapitalization plan includes (a) revised conversion terms for the SAS MSEK 1,500 subordinated perpetual floating rate capital securities (the “Existing Hybrid Notes”) and (b) an amendment regarding the conversion of the SAS MSEK 2,250 senior unsecured fixed rate bond due November 2022 (the “Bonds”), now to be converted into new commercial hybrid notes or common shares at the option of the Bondholder pursuant to a separate offer to the holders of the Bonds. Holders of 53.25% of the Existing Hybrid Notes and holders of 41.51% of the Bonds have to the noteholders’ committee led by Spiltan Fonder (the “Noteholders’ Committee” or the “NHC”) expressed their support for the agreement in principle. An additional revision of the recapitalization plan announced on 7 August 2020 is an increase of the interest rate by 90 bps per annum for the new MSEK 6,000 state hybrid notes that SAS proposes to issue to the Major Shareholders. The other components of the Initial Recapitalization Plan, including the business plan, the rights issue and the directed issue of common shares to the Major Shareholders remain unchanged as set out in the announcement on 30 June 2020. The time plan for completion of the Revised Recapitalization Plan has however been extended as further set out below. The Revised Recapitalization Plan remains subject to necessary general meeting approvals at an extraordinary general meeting scheduled to be held on or around 22 September 2020 (the “EGM”). The Major Shareholders’ participation is conditional on inter alia the conversion of the outstanding Existing Hybrid Notes and Bonds as set out above, the approval by the European Commission and exemptions from the mandatory bid obligation from the Swedish Securities Council. The participation by KAW is conditional on the participation by the Major Shareholders. 1 Scandinavian Airlines 195 87 Stockholm Telephone: +46 8-797 0000 Fax: +46 8-797 1515 www.sasgroup.net Conversion of the Existing Hybrid Notes and the Bonds as set out above requires approval by noteholders’ meetings scheduled to be held on 2 September 2020. If the Revised Recapitalization Plan is not implemented and fails, SAS will not be able to remedy the liquidity shortage and the negative equity caused by the COVID-19 outbreak, which would have a material adverse effect on the Company’s financial condition. Should SAS as a result of such material adverse effect on its financial condition be forced to file for bankruptcy, it is likely that the holders of the Existing Hybrid Notes and the Bonds will not be able to recover any of their claims under the notes. The NHC strongly encourages all bond and hybrid holders to support and to vote in favor of the proposals at the coming noteholders’ meetings. The NHC believes that the current proposal preserves maximum value for the holders of the Bonds and the Existing Hybrid Notes whilst providing support to SAS at a difficult time for the industry due to COVID-19. Both SAS and the NHC welcome any bond or hybrid holders outside of the NHC who want to reach out to discuss the result of the negotiations and why the representatives of the NHC believe the result to be appropriate (see contact details below). “On behalf of the SAS Board of Directors, I would again like to thank our major shareholders, creditors and partners for their continued support in these unprecedented and challenging times. The Board supports and believes that the Revised Recapitalization Plan presents a constructive way forward given the magnitude of the recapitalization need, the complexities concerning burden sharing measures and the interests of various stakeholders. The future of SAS depends on a successful outcome of the Revised Recapitalization Plan, as well as delivery on SEK 4 billion in efficiency improvements through rightsizing the Company´s cost structure to reflect a new situation of lower demand. The Board strongly encourages bond, hybrid and shareholders to vote in favor of the proposals to be presented at respective meetings, as there are no other available alternatives” says Carsten Dilling, chair of the SAS Board of Directors. Details on the Revised Recapitalization Plan Issue of the new state hybrid notes As set out in SAS’ announcement on 7 August 2020, the SEK denominated capital securities with perpetual tenor (the “New State Hybrid Notes”) to be issued to the Major Shareholders will have an interest rate which is increased by 90 bps per annum compared to the terms indicated for the New State Hybrid Notes in the Initial Recapitalization Plan, in order to comply with applicable state aid requirements. The New State Hybrid Notes will comprise: One set of hybrid notes (“NSHN1”), which will be placed with the Major Shareholders in the total amount of MSEK 5,000, split equally between them, will have a floating interest rate of 6M STIBOR plus an initial margin of 340 bps per annum. The margin 2 Scandinavian Airlines 195 87 Stockholm Telephone: +46 8-797 0000 Fax: +46 8-797 1515 www.sasgroup.net of the NSHN1 notes will thereafter increase to the following: during 2nd and 3rd year 440 bps per annum, during 4th and 5th year 590 bps per annum, during 6th and 7th year 790 bps per annum, and during 8th year and thereafter 1,040 bps per annum. The NSHN1 will be subordinated capital securities and will rank pari passu with the NSHN2 (as defined below). One set of hybrid notes (“NSHN2”), which will be placed with Denmark in the total amount of MSEK 1,000, will have a floating interest rate of 6M STIBOR plus an initial margin of 440 bps per annum. The margin of the NSHN2 notes will thereafter increase to the following: during 2nd and 3rd year 540 bps per annum, during 4th and 5th year 690 bps per annum, during 6th and 7th year 890 bps per annum, and during 8th year and thereafter 1,140 bps per annum. The NSHN2 will be subordinated capital securities and will rank pari passu with the NSHN1. The New State Hybrid Notes are freely transferable but unlisted and will be callable by SAS at any time at par value, and will be treated as equity in SAS’ accounting. Conversion of the Existing Hybrid Notes into common shares The Swedish and Danish governments have required, as a condition to their capital injections, burden sharing measures to be implemented including conversion of the Existing Hybrid Notes. On the basis thereof, and in accordance with SAS’ announcement on 7 August 2020, the Existing Hybrid Notes are proposed to be exchanged at 90% of par value for common shares in the Company and at a subscription price of SEK 1.16 per share. 1 As announced on 22 July 2020, the Company will pay the deferred interest on the Existing Hybrid Notes in cash in connection with the conversion into common shares of the Existing Hybrid Notes. Holders of 53.25% of the Existing Hybrid Notes have to the NHC expressed their support for the agreement in principle. These include all of the major holders in the NHC that SAS has negotiated with, representing 22.25% of the Existing Hybrid Notes. The Board has decided to summon a new meeting of the holders of the Existing Hybrid Notes to be held on 2 September 2020 for the purpose of resolving upon the aforementioned proposal. In order to resolve on the proposed conversion, at least 50% of the outstanding nominal amount (excluding any Existing Hybrid Notes owned by SAS or any of its subsidiaries) must participate in the meeting and at least 2/3 of the attending nominal amount (excluding any Existing Hybrid Notes owned by SAS or any of its subsidiaries) must vote in favor of the proposed exchange of the Existing Hybrid Notes. As a result of such resolution, the number of shares and votes in the Company will increase by up to 1,163,793,103. Holders of Existing Hybrid Notes casting their vote before 26 August 2020 (the “Early Bird Deadline”) will receive an additional fee of 0.2% of the nominal amount of each 1 The conversion of Existing Hybrid Notes into new common shares is expected to be completed on or around 5 November 2020. Interim shares (“BTAs”), which will be admitted to trading on Nasdaq Stockholm, will be delivered, upon transfer of the Existing Hybrid Notes, to the holders on or around 23 October 2020. 3 Scandinavian Airlines 195 87 Stockholm Telephone: +46 8-797 0000 Fax: +46 8-797 1515 www.sasgroup.net Existing Hybrid Note for which they vote, regardless of voting in favor or against the proposal.
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