The European Commission re-approves Denmark’s and Sweden’s participation in the 2020 recapitalization of SAS

The European Commission has today issued a new decision declaring the Kingdom of Denmark’s and the Kingdom of Sweden’s (collectively, the “States”) participation in the 2020 recapitalization of SAS as compatible State aid under the relevant EU rules, subject to the introduction of a “step-up mechanism” for the States’ share investments, as further described below. The contemplated step-up mechanism requires approval by the general meeting of shareholders in SAS AB (the “Company”), which is to be summoned in short order.

In 2020, the States participated in the recapitalization of SAS through a subscription for hybrid notes and common shares in the Company in an aggregate amount of approximately SEK 9.5 billion (the “2020 State Investments”). The 2020 State Investments were initially approved by the European Commission in 2020 as compatible State aid under the Temporary Framework for State aid measures to support the economy in the COVID-19 outbreak (the “Temporary Framework”). However, in May 2023, the EU General Court held, following a third-party challenge, that the European Commission had erred in its initial approval decision by not requiring the States to include a “step-up mechanism”, as required by the Temporary Framework, in relation to the States’ subscriptions for common shares in the Company. As a result, the European Commission’s initial approval of the 2020 State Investments was annulled.

Today, the European Commission once again approved the 2020 State Investments as compatible State aid under the Temporary Framework, subject to the introduction of a step-up mechanism in relation to the States’ 2020 share investments. The contemplated step-up mechanism, which entails unilateral commitments from SAS to issue new hybrid notes to the States without any consideration, under certain conditions related to the States’ 2020 share investments, requires approval by the general meeting of shareholders in the Company as the commitments are deemed related-party transactions under the Swedish Companies Act.

The contemplated step-up mechanism does not affect the investment agreement entered into as part of SAS’ chapter 11 process in the US, which, among other things, entails equity investments in the reorganized SAS, as further described in the press releases announced by the Company on October 3 and November 4, 2023, respectively.

SAS intends to convene an extraordinary general meeting of the Company’s shareholders, to be held in January 2024, to approve the contemplated step-up mechanism within short order.