Norwegian Air will sell new shares at just a third of the current market price when the loss-making airline seeks to raise money from its owners in the next few weeks, it said this week.
Norwegian Air said on January 29 that it planned to raise 3 billion Norwegian crowns in a share sale to bolster its finances, just days after British Airways owner IAG ruled out a bid for the budget airline.
Norwegian is trying to replicate on transatlantic flights the low-cost model that dominates the short-haul market via companies such as Ryanair and easyJet, but is struggling to make the business profitable.
The European airline sector is struggling with over-capacity and high fuel costs, with several companies going out of business, the latest being British budget airline Flybmi, which has filed for bankruptcy.
In the rights issue, Norwegian's shareholders will get two subscription rights to buy shares for every share they currently own, and new shares will be sold at 33 crowns each, compared with the closing price of 97.34 crowns on Friday February 15.
By selling new shares far below the current market price, Norwegian will boost the value of each of the purchasing rights, which can in turn be bought and sold.
"Exercise Or Sell"
"Shareholders must decide whether to exercise or sell their subscription rights, or a combination thereof, to maintain the full value of the shareholding," Norwegian said in a statement.
Norwegian's chief executive and the board chairman have said they will sell some of their subscription rights to other investors, in a move that would reduce the 24.66% stake they currently hold in the airline.
"HBK has agreed to sell the subscription rights at a price of 70% of the theoretical value of the subscription rights at the time of pricing of the rights issue," HBK - the vehicle through which the chairman, CEO and their families own their stake - said in a statement.
It did not say who would buy those rights.
Norwegian said last month that billionaire investor John Fredriksen was among those who had agreed to take part in its share issue.
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