Sweden rejects credit guarantee for struggling Norwegian Air

Sweden’s Debt Office has refused a state credit guarantee for Norwegian Air NORR.OL, it said on Tuesday, renewing liquidity concerns for the struggling airline amid the coronavirus crisis.

Norwegian Air was already facing financial difficulties before the pandemic hit and Sweden has stipulated its credit guarantees, under a programme mitigating the impact of COVID-19, can only be granted to airlines assessed to have been financially viable on the last day of 2019.

“The Debt Office’s assessment in regard to Norwegian is that as of 31 December 2019 there was a very high risk that Norwegian would not be able to fulfil its financial commitments and that the company was not deemed capable then of managing further indebtedness,” it said in a statement.

“Therefore, the company has not been considered financially viable as of 31 December 2019. Accordingly, Norwegian’s application has been denied.”

A Norwegian Air spokesman said it was difficult to understand the decision when Sweden had granted a loan guarantee to main rival SAS (SAS.ST).

“We meet all of the requirements, so the only way to interpret this rejection is that the authorities do not want competition in Sweden,” he said in an email.

While there will be no immediate impact on the airline, it has indicated it would need more cash to rebuild after the coronavirus crisis hit its operations hard. It has said its cash needs would strongly depend on how fast it ramps up.

The group received emergency financial guarantees from the Norwegian government in May, but only after raising cash from owners and forcing creditors to convert part of the debt to equity.

A Swedish Debt Office spokeswoman said Norwegian had not formally applied for a specific amount.

Sweden in March granted Swedish-Danish SAS (SAS.ST) a 1.5 billion crown credit guarantee under its programme, and SAS also hopes to raise cash from its main owners, including Sweden, under a recapitalisation plan. [nL8N2FG2RD]

Rapid growth had made Norwegian Air Europe’s third-largest budget airline and the biggest non-U.S. carrier serving major U.S. cities, but debts and liabilities have built up to about $8 billion by the end of 2019.

The Swedish Debt Office’s decision cannot be appealed.

Shares in Norwegian Air, which closed down most of its routes in March, were down 4% at 0832 GMT, taking a year-to-date fall to 97%.