SAS AB: $1.2B Castlelake-Led Recapitalization and Cramdown of State Hybrid Bonds

SAS AB and 13 affiliated debtors filed voluntary chapter 11 petitions on July 5, 2022 in the U.S. Bankruptcy Court for the Southern District of New York under lead case number 22-10925 before Judge Michael E. Wiles. The filing was framed as the implementing vehicle for the SAS FORWARD transformation plan after the airline could not secure the lessor, OEM, and labor concessions needed to execute that plan out of court, and after a 15-day pilot strike that began the day before the petition was estimated to cost $10–13 million per day in lost revenue.

The case ran for roughly 25 months under chapter 11. Judge Wiles entered the Confirmation Order on March 22, 2024, the plan went effective on August 27, 2024, and a Castlelake-led investor consortium recapitalized the reorganized airline with $1.175 billion in new equity and secured convertible notes. Existing equity, the State Hybrid Bonds held by the Kingdoms of Denmark and Sweden, and the publicly issued Swiss Bonds were crammed down at zero recovery. The final remaining affiliated case (Gorm Warm Red Ltd.) closed under a final decree entered March 3, 2026.

Debtor	SAS AB (14 jointly administered entities)
Court	U.S. Bankruptcy Court, Southern District of New York
Case Number	22-10925
Petition Date	July 5, 2022
Judge	Hon. Michael E. Wiles
Confirmation Date	March 22, 2024
Effective Date	August 27, 2024
Final Decree	March 3, 2026
DIP Facility	$700M Apollo (Sep 2022); refinanced by $500M Castlelake (Nov 2023)
Claims Agent	Kroll Restructuring Administration LLC

Pilot Strike, Pandemic Collapse, and the Failure of SAS FORWARD

The First Day Declaration of CFO Erno Hildén attributes the filing to a convergence of revenue collapse, structural cost disadvantages, and a failed out-of-court restructuring. SAS carried more than 30 million passengers in fiscal year 2019 against approximately $3.5 billion in passenger revenue. By fiscal year 2021 those figures had fallen to 7.5 million passengers and approximately $840 million in passenger revenue, with FY20 revenue down roughly 56% and FY21 revenue down roughly 70% versus FY19. Business travel — historically a disproportionate share of SAS's revenue mix — remained substantially below pre-pandemic levels through the petition date, and the Delta and Omicron variants extended the demand drag into 2022.

The Hildén Declaration also identifies structural pressures that made the pandemic shock harder to absorb. SAS faced low-cost and ultra-low-cost carrier competition in European short-haul markets and full-service network competition on long-haul routes, with peers generally operating with lower labor and aircraft costs and better access to equity capital. The Russian invasion of Ukraine in early 2022 closed Russian airspace, forcing the suspension of most long-haul Asia routes and lifting fuel costs.

Against that backdrop, SAS announced the SAS FORWARD transformation plan on February 22, 2022, targeting an SEK 7.5 billion (approximately $750 million) annual cost reduction by 2026, conversion of approximately SEK 20 billion of debt and hybrid notes into equity, $1.2 billion of new exit capital, fleet redesign, and new collective bargaining agreements with the pilot unions. The Hildén Declaration states that SAS could not secure the necessary concessions from aircraft lessors, original equipment manufacturers, and labor unions to execute SAS FORWARD out of court.

The pilot unions ended out-of-court negotiations on July 4, 2022 by initiating a strike involving approximately 900 SAS Scandinavia pilots, cancelling roughly half of scheduled flights at an estimated daily cost of $10–13 million. The petition followed the next day. The Hildén Declaration ties the chapter 11 filing directly to the need to lock in DIP liquidity and force the SAS FORWARD architecture into a court-supervised process the unions, lessors, and OEMs would have to engage with.

Unsecured Capital Stack and Sovereign Hybrid Bonds

At the petition date, all funded debt at SAS AB and the operating Consortium was unsecured. The Hildén Declaration sets out an instrument-by-instrument breakdown across both borrowing groups.

At the SAS AB holding company, the senior unsecured layer consisted of a Nordea Term Loan of approximately $152 million (NOK 1,497.5 million), priced at NIBOR plus 0.55%. Nordea Bank Abp's position was acquired by Eksfin, the Norwegian export credit agency, on June 23, 2022 — less than two weeks before the petition. SAS AB also had approximately $162 million (SEK 1.615 billion) of publicly issued Commercial Hybrid Bonds carrying a stepped variable rate (STIBOR plus a margin that escalated to 15.90% by October 2030) and approximately $133 million of publicly issued Swiss Bonds, which ranked junior to both the Nordea Term Loan and the Commercial Hybrid Bonds.

The two State Hybrid Bond facilities sat at the bottom of the SAS AB stack. State Hybrid Bonds 1, with approximately $500 million (SEK 5 billion) outstanding, were held by the Kingdoms of Denmark and Sweden; State Hybrid Bonds 2, with approximately $100 million (SEK 1 billion) outstanding, were held by the Kingdom of Denmark alone. Both were perpetual, junior subordinated, and carried variable rates with margins that escalated through 2027. These two instruments were the prepetition expression of the approximately $1.2 billion 2020 Danish and Swedish recapitalization and would become the central focus of the EU state-aid litigation discussed below.

The operating Consortium had its own borrowings. A Danish Term Loan of approximately $155 million (DKK 1,099,050,000) was held by the Kingdom of Denmark through Danmarks Nationalbank, priced at the relevant Danish government bond rate plus 3.14%. A Swedish Term Loan of approximately $150 million sat alongside it. The Consortium also shared the Nordea Term Loan and Swiss Bonds with SAS AB.

Apollo DIP, UCC Equity Objections, and Castlelake Refinancing

The Debtors filed their DIP Motion on August 16, 2022 seeking authority to enter a $700 million senior secured superpriority facility from funds managed by Apollo Management Holdings, L.P., structured as two $350 million tranches with the second tranche conditioned on cost-savings milestones. Pricing was 9.0% per annum plus Adjusted Term SOFR (1% floor), with a 1.0% upfront fee, a 2.0% unused commitment fee, a 4.0% exit/prepayment fee, a 1.0% breakup fee, and extension fees of 0.75% to 1.50%. Collateral included senior secured liens on substantially all Obligor assets, including EuroBonus loyalty program rights, Heathrow Airport slots, intellectual property, unencumbered aircraft and engines, and shares in wholly owned LLCs. Judge Wiles entered the final order approving the Apollo facility on September 12, 2022.

The most contested elements of the Apollo facility were two equity-linked features that the Official Committee of Unsecured Creditors objected to: a "Call Option" allowing Apollo to convert some or all of its DIP claims to equity at exit, and a "Tag Right" allowing Apollo to subscribe for up to 30% of new-money equity at exit. The UCC's statement raised concerns about the size of the associated termination fees, the absence of court or committee oversight over decisions to accept or reject the equity features, and whether the bundled structure constituted an impermissible sub rosa plan. Through negotiation the UCC obtained material modifications: the Tag Right termination fee was reduced from 4.0% to 3.0%, court and committee oversight rights were added over Call Option and Tag Right decisions, the Call Option termination fee trigger was narrowed, Apollo was required to exhaust other DIP collateral before reaching avoidance action proceeds, and committee notice rights over Apollo co-investment transactions were strengthened.

The Apollo facility did not survive the case. On November 4, 2023 the Debtors filed a motion to refinance the Apollo DIP with a $500 million superpriority term loan from Castlelake, L.P. — the same lender that ultimately led the winning investor consortium. The replacement facility carried interest at Term SOFR plus 8.0% (1% floor), a 1.75% upfront fee, a 4.5% exit fee, and a nine-month maturity from a November 15, 2023 closing date with two three-month extension options. Apollo filed a contested limited objection asserting that provisions of the original Apollo DIP order and credit agreement had to be honored in any refinancing. Judge Wiles approved the Castlelake replacement on an interim basis on November 9, 2023 and on a final basis on November 21, 2023, with the proceeds used to repay the Apollo facility and bridge to plan emergence.

Equity Solicitation and the Castlelake-Led Investor Consortium

SAS did not pursue a section 363 asset sale. The court-approved equity solicitation procedures entered May 15, 2023 framed the recapitalization as a controlled auction for a controlling new-money investment in Reorganized SAS. The Debtors solicited letters of intent through July 17, 2023 (extended from a June 26 initial deadline), revised LOIs through August 7, governance term sheet markups through August 14, and chapter 11 plan term sheet markups through August 28, with final bids due September 25, 2023. Two final bids were received, revised final bids were submitted between September 29 and October 1, and the Notice of Successful Third-Party Bid was filed on October 3, 2023.

The winning consortium combined a financial sponsor, a strategic carrier, the Danish State, and a Danish family office, with total investment of $1.175 billion (SEK 12.925 billion) split between $475 million (SEK 5.225 billion) of new unlisted equity and $700 million (SEK 7.7 billion) of secured convertible debt at SOFR plus 650 basis points with a seven-year maturity. Pre-conversion, Castlelake took roughly 32.0% of new equity and 55.1% of the convertible notes, the Danish State took roughly 25.8% of equity and 29.9% of the notes, Air France-KLM took roughly 19.9% of equity and 5.0% of the notes, Lind Invest ApS took roughly 8.6% of equity and 10.0% of the notes, and other creditors took roughly 13.6% of equity through plan distributions. Up to $325 million (SEK 3.575 billion) was separately allocated for distribution to general unsecured creditors. Post-conversion of the convertible notes, Castlelake would hold the majority equity stake in Reorganized SAS.

The Danish State's dual role — existing prepetition State Hybrid Bond holder receiving zero recovery while simultaneously committing new money as both equity investor and convertible noteholder — defined the political and creditor architecture of the transaction. Air France-KLM's investment created a strategic carrier alignment that came with a SkyTeam loyalty migration implemented after emergence.

Plan Treatment, Cramdown, and the GUC Pool

The Second Amended Joint Chapter 11 Plan of Reorganization filed February 7, 2024 set out parallel class structures for SAS AB and the Consolidated Debtors. The Disclosure Statement was approved at the same hearing.

At SAS AB, Class 1 (Other Secured) and Class 2 (Other Priority) were unimpaired and presumed to accept at 100%. Class 3 (Aircraft Lease and Trade Claims), Class 4 (Norwegian Term Loan), and Class 5 (Commercial Hybrid Bond, Other GUC, and Intercompany Claims) were impaired and entitled to vote, with recoveries derived from the GUC Pool described below. Class 8 (Swiss Bond Claims), Class 10 (State Hybrid Bond and Danish State Hybrid Bond Claims), and Class 11 (Existing Equity Interests) were impaired, deemed to reject, and received zero recovery.

At the Consolidated Debtors, Class 1 and Class 2 again rode through unimpaired. Class 3 (Aircraft Lease, Trade, and Union Claims) included the pilot union claims. Class 4 (Danish, Swedish, and Norwegian Term Loan Claims) consolidated the operating-entity sovereign and Norwegian term loan exposure. Class 5 (Other General Unsecured Claims) and Class 6 (Convenience Class Claims) carried the bulk of trade and small-claim recovery. Class 6 received a fixed cash distribution equal to 10% of the allowed claim amount for any allowed Consolidated Debtor general unsecured claim of $1,499,000 or less as of the petition date. Class 8 (Swiss Bond Claims) was again deemed to reject at zero. Class 9 (Intercompany Interests) was unimpaired.

The economics of recovery for impaired voting classes flowed through the GUC Pool: up to $325 million (SEK 3.575 billion) funded by the investor consortium and distributed pro rata as a combination of cash and new shares of Reorganized SAS. Holders of allowed general unsecured claims received their pro rata share of the GUC Pool. The convertible notes' SOFR + 650 bps coupon and seven-year maturity left the post-emergence capital structure with a defined deleveraging path keyed to the conversion mechanics.

The pilot union claim sat inside Consolidated Debtor Class 3. The Labor RSA negotiated after the 15-day strike granted the pilot unions an allowed general non-priority unsecured claim against the Consortium of SEK 1 billion (approximately $100 million). An amended and restated agreement dated November 15, 2022 (approved December 8, 2022) removed the original requirement that the pilot unions vote in favor of the Plan. The Norwegian Pilot Union (Norske SAS-flygeres Forening) separately moved for appointment to the UCC under 11 U.S.C. § 1102(a)(4), a contested matter that involved U.S. Trustee communications.

The U.S. Trustee was the sole party objecting to the Disclosure Statement, challenging the use of an opt-in mechanism for third-party releases on the ballots, the scope of the exculpation provision, and certain UST fee compliance issues. The Debtors agreed to revise the exculpation provision to limit it to conduct through the Effective Date and treated the remaining issues as confirmation-stage objections. The UST renewed the objection at confirmation. The Confirmation Order overruled all remaining objections and granted cramdown under section 1129(b) as to the Swiss Bond, State Hybrid Bond, and existing equity classes.

EU State Aid Litigation and Ryanair Challenges

The 2020 Danish and Swedish recapitalization that produced the State Hybrid Bonds also produced a parallel EU state-aid track that ran through almost the entire chapter 11 case. The Disclosure Statement records that the European Commission initially approved the recapitalization in August 2020, but in May 2023 the EU General Court set aside that approval after finding the Commission had not required a step-up mechanism to incentivize the Kingdoms' exit from the resulting equity stake. Ryanair was the principal challenger of both the original approval and the subsequent re-approval.

The Commission opened a new investigation and, on November 29, 2023, re-approved the recapitalization subject to a step-up mechanism requiring the Kingdoms to reduce their recapitalization shareholding by 40% by October 26, 2024 and to fully exit by October 26, 2026. Failure to meet those milestones would require SAS AB to issue additional hybrid notes to the Kingdoms. The EFTA Surveillance Authority separately concluded that Norway's participation in the restructuring — which involved writing off an unsecured claim — did not constitute prohibited state aid. The November 2023 Commission re-approval came roughly two months after the Castlelake-led winning bid was identified and before the Second Amended Plan was filed, which removed an EU regulatory overhang from the path to confirmation.

Confirmation, Emergence, and Final Decree

Judge Wiles entered the Confirmation Order on March 22, 2024, finding the Plan satisfied each requirement of section 1129(a) and granting cramdown under section 1129(b) as to the Swiss Bond Claims, State Hybrid Bond Claims, and existing equity. The Plan went effective on August 27, 2024 — approximately 25 months after the petition. SAS characterized the emergence as a "new era" and announced a new board of directors and the SkyTeam loyalty migration that took effect later in 2024. The U.S. restructuring ran in parallel with a Swedish reorganization filed in the Stockholm District Court, which became effective concurrently with the chapter 11 plan effective date. That Swedish proceeding addressed jurisdictional challenges for commercial hybrid bondholders, who received contingent value notes and cash distributions through the Swedish process rather than as plan distributions under the U.S. chapter 11.

Final professional fee allowances were entered on a Certificate of No Objection filed December 2, 2024, aggregating to approximately $181 million across thirteen retained firms. Weil, Gotshal & Manges LLP was approved as Debtors' lead counsel at $50,253,724.05. Seabury Securities LLC was approved as investment banker and financial advisor at $36,851,940.28. FTI Consulting, Inc. received $22,600,800.80 as Debtors' financial advisor, with Skandinaviska Enskilda Banken AB receiving $14,465,000.00 as Scandinavian financial advisor. Mannheimer Swartling Advokatbyrå AB received $10,198,422.70 as Swedish special counsel. UCC counsel Willkie Farr & Gallagher LLP received $13,849,273.00, with UCC investment banker Jefferies LLC at $7,225,000.00 and AlixPartners, LLP at $2,688,733.00 as UCC financial advisor. Norton Rose Fulbright was approved at $6,944,499.00 and Alton Aviation Consultancy LLC at $8,934,318.00. Schjødt was approved at $3,535,105.50 as Norwegian special counsel and DLA Piper at $3,713,151.66. Kroll Restructuring Administration LLC, the claims and noticing agent, was approved at $296,951.86.

Most affiliated cases closed under a final decree entered December 27, 2024. The Reorganized Debtor filed a motion to close the last remaining case on February 10, 2026, a Certificate of No Objection followed on March 1, 2026, and the final decree closing Gorm Warm Red Ltd. was entered March 3, 2026.

Key Timeline

Frequently Asked Questions

Who is the claims agent for SAS AB?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

What did existing SAS AB shareholders receive under the confirmed plan?

Existing equity interests (SAS AB Class 11) were impaired, deemed to reject, and received no distribution. The Confirmation Order granted cramdown under section 1129(b) and the Plan cancelled prepetition equity at the effective date.

What did Swiss Bond and State Hybrid Bond holders recover?

Both classes received zero recovery. The Swiss Bond Claims (Class 8) and the State Hybrid Bond Claims (SAS AB Class 10), held by the Kingdoms of Denmark and Sweden, were impaired, deemed to reject, and crammed down. The Disclosure Statement sets out the basis for non-payment.

Who provided the new money at exit, and how much?

A consortium led by Castlelake, L.P. and including Air France-KLM S.A., the Danish State, and Lind Invest ApS provided $1.175 billion (SEK 12.925 billion), comprising $475 million of new unlisted equity and $700 million of secured convertible debt priced at SOFR plus 650 basis points with a seven-year maturity. Castlelake took the largest pre-conversion equity stake at approximately 32.0% and 55.1% of the convertible notes.

Why did the Apollo DIP get refinanced?

The Debtors filed a motion in November 2023 to refinance the original $700 million Apollo DIP with a $500 million superpriority term loan from Castlelake. Apollo filed a contested limited objection, but Judge Wiles approved the replacement on a final basis on November 21, 2023, and Castlelake — which then led the winning investor consortium two weeks earlier — became the DIP lender of record through emergence.

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