March 19, 2020 / 7:29 PM / 17 days ago

UPDATE 3-Norway offers NOK 3 bln credit guarantee to Norwegian Air, with conditions

(Adds Norwegian Air CEO reaction)

By Victoria Klesty

OSLO, March 19 (Reuters) - Norway will back airlines with credit guarantees worth up to 6 billion Norwegian crowns ($537 million), half of it to Norwegian Air, in a bid to stave off collapse in the industry because of the coronavirus crisis, the government said on Thursday.

Norwegian Air, which has grounded most of its aircraft and will temporarily lay off 90% of staff, said it welcomed the offer. It has made repeated pleas to Norway for liquidity to keep the company afloat.

The company can get up to 3 billion crowns, but must boost its equity to get the full amount, Industry Minister Iselin Nyboe told a news conference.

"We are very grateful that we are now being offered this," the company's Chief Executive Jacob Schram said.

While it was too early to comment on the specific conditions set by the government however, the firm will do all it can to meet the demands, Schram said.

Airlines around the world have made unprecedented cuts to flights, costs and staffing while stepping up calls for emergency aid as coronavirus lockdowns and travel restrictions hit major routes.

Scandinavian rival SAS could get guarantees of 1.5 billion, while domestic airline Wideroe and other small airlines will be offered the rest.

Norwegian Air could initially get access to 300 million crowns, but must also convince commercial lenders to supply 10% of the amount, Nyboe said.

A further 1.2 billion would be made available if creditors agree to forego interest rates and installments, while the remaining 1.5 billion hinged on the company's ability to boost its equity capital.

"Norwegian had financial challenges also before the coronavirus crisis, and with this plan we make it clear that both owners and lenders must contribute to improving the company's financial situation if the state is to provide guarantees," Nyboe said.

A pioneer in transatlantic budget travel since 2013, Norwegian quickly became the largest foreign carrier serving the New York region and a major player at other U.S. airports.

But the carrier lost money in each of the last three years and ended 2019 with debts of some $7.2 billion, making it vulnerable to an industry downturn.

SAS, which is also axing 90% of staff, on Tuesday secured guarantees from the Swedish and Danish governments worth $300 million and a pledge from Denmark to what it takes to keep the carrier flying.

$1 = 11.1799 Norwegian crowns Reporting by Victoria Klesty, editing by Terje Solsvik and Grant McCool

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