Norwegian shares plummet; $3.5 billion debt & massive losses

Norwegian Airlines announces a share issue today to try and raise money. It’s shares plunged 30% in value on the news, later recovering to a -12%.

The airline is required to inform shareholders of the dilution of their existing holdings, it’s debt now running at $3.5 billion and likely losses for 2018 of $450 million. It’s trying to raise $350 million to cover its immediate future obligations.

These are staggering sums for an airline that actually has very few assets, and is facing a tough first quarter. Norwegian has been on the list of likely failures for over three years but it’s weakness is now becoming painfully clear.

It’s debt is so vast that IAG walked away from any thoughts of a buyout only last week and promptly sold its shares.

Norwegians capacity for PR spin will no doubt make light of it and try to turn a negative into a positive. There are some big investors like Norway’s Sovereign Wealth Fund who will be panicking and trying to shore up the airlines public relations, but if they can stop the rot it’ll be close to miraculous.

Crashing share values are no way to raise money, and trying to dilute the value of existing owners shares is even less likely to encourage further investment as certainty over its future withers. Brokers say there is absolutely no appetite in the market for more Norwegian shares and they have no idea who would buy them.

The trouble with Norwegian is that it’s now become – and this may have been intentional – too big to be allowed to fail. A collapse would be a major loss to Danske Bank, Norways Sovereign Wealth fund and billionaire John Fredricksen, never mind 16,000 minor share holders including staff. Yet none of them seem to want to buy deeper into the company – but they don’t want to see it fail either.

This post has been updated.