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SAS proposes that the annual general meeting authorises the Board to resolve on the issuance of preference shares and convertible debt

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SAS AB (“SAS”) announced, in connection with the year-end report for the fiscal year ending 2012/2013, that the company is investigating the possibilities of issuing preference shares and/or convertible debt to strengthen the capital base.

In order to facilitate the issuance of such financial instruments, the Board of Directors proposes, in accordance with the notice to the annual general meeting (“AGM”) on 18 February 2014, that the AGM authorises the Board of Directors to resolve on the issuance of preference shares, with or without preferential rights for SAS’ shareholders, as well as the issuance of convertible debt without preferential rights for SAS’ shareholders, and to resolve on related amendments to the articles of association of SAS.

Background and reason for the Board’s proposal

SAS’ change programme, 4Excellence Next Generation (4XNG), is focused on addressing three main areas – costs, flexibility and liquidity/equity – which includes the ambition to raise capital, through traditional financing sources as well as more novel financial solutions such as convertible debt or preference shares, to finance a renewal of the aircraft fleet, address upcoming debt maturities as well as reduce the negative effect on the group’s equity from the change in accounting standards for pensions (IAS 19).

In order to address investment requirements and upcoming debt maturities, the Board of Directors proposes that the AGM authorises the Board of Directors to resolve on the issuance of convertible debt and/or issuance of preference shares. By issuing preference shares SAS would strengthen its capital base, which leads to reduced net debt and an improved equity ratio as well as improved financial preparedness. An issuance of convertible debt would mainly be intended to replace the company’s existing convertible debt which falls due in 2015.

The preference shares and key proposed changes to the article of association

In accordance with the proposed changes to SAS’ articles of association which the AGM has to consider, the preference shares will have a preferred right, before ordinary as well as subordinated shares, to an annual dividend of SEK 50 per preference share from the time of the issuance. The dividend is subject to an annual increase after five years corresponding to (1) percent of the subscription price until the dividend amounts to SEK 50 plus five (5) percent of the subscription price. The annual dividend is paid out in quarterly instalments. The dividend is conditional on approval by the AGM and that the parent company has sufficient distributable funds available. The dividend is accumulating and subject to a certain penalty interest rate should the dividend be less than the preferred right that the preference shares are entitled to. The preference shares do not carry any other right to dividends. Each preference share carry 1/10 of a vote of an ordinary share in SAS.

The Board of Directors can resolve to redeem the preference shares, partially or in full, for an amount corresponding to 120 percent of the subscription price up to and including the dividend payment date which occurs closest to the record date on 5 February 2018 and at 105 percent of the subscription price in the period thereafter, in every case with the addition of any accrued amount per preference share and accrued preference share dividend.

Convertible debt

The proposed authorisation relating to convertible debt relates to the issuance of bonds with accompanying rights enabling conversion into new ordinary shares in the company. SAS today has a SEK 1.6 billion convertible bond outstanding which falls due in 2015.

The Board of Directors’ proposals for authorisation

The Board of Directors proposes that the AGM authorises the Board of Directors to resolve on the issuance of up to 7,000,000 preference shares, with or without preferential rights for SAS’ shareholders. The reason for a possible deviation from the preferential rights of shareholders is to enable SAS to raise preference share capital at attractive terms in order to strengthen the capital base and attract institutional investors, for whom in particular preference shares should be suitable for.

The Board of Directors also proposes that the AGM authorises the Board of Directors to resolve on the issuance of convertible debt, without preferential rights for SAS’ shareholders, for an amount up to SEK 2,000 million which, following conversion, shall not amount to more than 130 million ordinary shares.

The reason for deviating from the preferential rights of shareholders is to create flexibility to strengthen the capital base and financial preparedness when market conditions on the international convertible debt market are favourable.

The authorisations may be utilised on one or several occasions, however only until the next AGM. The Board of Directors’ proposals for authorisation and proposed changes to the articles of association can be found in full on the company’s website not later than three weeks prior to the AGM. The resolutions require consent from shareholders representing at least two thirds (2/3) of votes cast as well as votes represented at the AGM.

Advisors

Carnegie Investment Bank AB (publ), Nordea Bank AB (publ), Markets – Investment Banking and SEB Corporate Finance, Skandinaviska Enskilda Banken AB have been appointed as financial advisors to evaluate the possibility of issuing preference shares.

JP Morgan has been appointed as financial advisor to evaluate the possibility of issuing convertible debt. Mannheimer Swartling has been appointed as legal advisor.

 

For additional information:

Press Office telephone: +46 8 797 2944

SAS Investor Relations

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