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Norwegian Air shares hit as travel slump puts liquidity on radar

03/06/2020 | 12:34pm EST
FILE PHOTO: Norwegian Air Sweden Boeing 737-800 plane SE-RRJ taxies to take-off in Riga International Airport in Riga

Norwegian Air's shares lost a quarter of their value on Friday on concerns about its ability to weather a dramatic drop in global travel as the coronavirus spreads.

Pareto Securities cut its rating on the airline's stock, saying it was concerned about weak cash reserves and the risk that it may have to issue new shares to shore up its finances.

ABG Sundal Collier also cut its rating on the stock, from hold to sell, saying the firm was low on cash and in danger of breaching its loan covenants in the second quarter of 2020.

Norwegian Air said on Friday it had sold over two-thirds of its available seats for March and that the situation was "challenging" and "changing constantly".

Analysts have warned that Norwegian, which has expanded the low-cost carrier model to long-haul flights, could be particularly vulnerable due to its high debts.

ABG Sundal Collier forecasts Norwegian will have a cash balance at the end of the first quarter of 1.2 billion crowns and at the end of the second quarter of 0.9 billion crowns.

"Too low, in our view. This means we expect Norwegian to raise new equity," it said.

The airline has already raised 5.4 billion Norwegian crowns via three share issues in two years, as well as a convertible bond, to help shore up its finances.

The airline's shares hit a 15-year low on Friday, down 95% from their 2015 peak, and the company's market capitalisation is now 1.95 billion Norwegian crowns ($211 million).

Debts and liabilities amounted to 81.2 billion Norwegian crowns ($8.79 billion) at the end of 2019, while cash and cash equivalents stood at 3.1 billion crowns.

In 2018, Norwegian rebuffed takeover offers from British Airways' parent company IAG, which has since said it was no longer interested in buying the ailing carrier.

Norwegian's convertible bonds have so-called covenants linked to the finances of a key subsidiary, Arctic Aviation Assets (AAA), which must keep its book equity and debt levels within certain minimum levels.

ABG expects a book equity at the end of the first quarter of 1.56 billion crowns, just above the bond covenant of 1.5 billion crowns, unless the airline can make a profit from the planned sale of an aircraft.

At the end of the second quarter, "we see Norwegian Air breaching covenants on our numbers," ABG said.

Norwegian scrapped its 2020 earnings outlook and cut some transatlantic flights on Thursday, blaming the coronavirus outbreak.

At 1454 GMT, Norwegian Air's shares were down 23.7% at 12.06 Norwegian crowns ($1.30).

The stock has fallen almost 70% since the start of February, making it the hardest hit among European airlines, as the virus spread to Europe and the United States, forcing airlines to cut flights and costs and warn of a hit to earnings.

"There is clearly a risk for all the airlines, but we see Norwegian with a slim cash buffer perhaps at a (bigger) risk," Pareto Securities analyst Kenneth Sivertsen told Reuters, pointing out that it may require new equity.

He cut the stock to "hold" from "buy" and slashed its price target to 15 crowns from 50.

Norwegian Air hardest hit among European airlines: https://fingfx.thomsonreuters.com/gfx/buzzifr/15/8582/8582/Pasted%20Image.jpg

By Nerijus Adomaitis and Izabela Niemiec

ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
ABG SUNDAL COLLIER HOLDING ASA -2.74% 9.22 Real-time Quote.44.51%
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A. -14.58% 131.82 Delayed Quote.-17.77%
NORWEGIAN AIR SHUTTLE ASA -10.27% 9.03 Real-time Quote.-77.76%
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Analyst Recommendations on NORWEGIAN AIR SHUTTLE ASA
More recommendations
Sales 2021 5 125 M 565 M 565 M
Net income 2021 -1 334 M -147 M -147 M
Net Debt 2021 59 783 M 6 585 M 6 585 M
P/E ratio 2021 -0,33x
Yield 2021 -
Capitalization 8 376 M 921 M 923 M
EV / Sales 2021 13,3x
EV / Sales 2022 3,74x
Nbr of Employees 6 365
Free-Float 79,3%
Duration : Period :
Norwegian Air Shuttle ASA Technical Analysis Chart | NAS | NO0010196140 | MarketScreener
Technical analysis trends NORWEGIAN AIR SHUTTLE ASA
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 3
Last Close Price 9,03 NOK
Average target price 16,00 NOK
Spread / Average Target 77,2%
EPS Revisions
Managers and Directors
Geir Magne Karlsen Chief Executive Officer
Svein Harald ěygard Chairman
Knut Olav Irgens Melhus H°eg Executive Vice President-Information Technology
Johan Gauermann Executive Vice President-Operations
Sondre Gravir Independent Director
Sector and Competitors