SAS — Share Issue/Capital Change 2014

Feb 7, 2014

SAS AB announces preference share issue and considers additional financing measures

SAS AB announces preference share issue and considers additional financing measures

Not for release, publication or distribution, directly or indirectly, in

or into the United States, Canada, Japan, Australia or any other

jurisdiction where such action would be prohibited.

The Board of Directors of SAS ("SAS" or "the Company") has resolved to

offer institutional investors and the general public in Denmark, Norway

and Sweden to subscribe for preference shares in SAS AB for a total

amount of approximately SEK 2 billion ("the Offer"). The proceeds raised

will primarily be used for the continued renewal of the aircraft fleet

and to strengthen the financial preparedness.

The company also intends to issue convertible bonds of up to SEK 2

billion in close connection with or shortly after, the Offer, provided

that the market conditions are deemed advantageous, as described below.

In addition, the company has entered into a financing agreement with UBS

totalling MEUR 150.

Summary of the Offer

· The Offer, consisting of approximately 4 million preference shares,

is carried out at a subscription price of SEK 500 per preference share

· Annual dividend yield for the first five years amounts to 10% given

the subscription price above and provided that the annual dividend of

SEK 50 per preference share is distributed during the entire five year

period

· The subscription period runs from 10 February 2014 until 20 February

2014 for institutional investors and from 10 February 2014 until 19

February 2014 for the general public in Denmark, Norway and Sweden

· Estimated first day of trading of the preference shares on NASDAQ

OMX Stockholm is 7 March 2014

The Offer is conditional on, inter alia, that the AGM approves the

proposed changes to the Articles of Association and authorises the Board

of Directors to resolve on the issuance of preference shares.

Background and reasons

SAS operates in a highly competitive industry characterized by price

pressure and fluctuating demand, while operations are capital intensive

due to recurring investments in the aircraft fleet. In order to meet the

increasingly intense competition, manage the effects of the revised

accounting policies related to pensions, which threatened to dilute SAS

book equity, and to create the conditions necessary for long-term

financing SAS initiated, in the autumn of 2012, the restructuring

program 4Excellence Next Generation ("4XNG").

4XNG focuses on three subareas - costs, flexibility and

liquidity/equity. Under 4XNG, SAS has implemented a renegotiation of

employee collective agreements that has led to market adjustment of

salary, working and pension benefits as well as centralized

administrative operations. Furthermore, SAS has carried out substantial

savings within IT operations through procurement of new IT-systems and

through the reduction of applications. SAS has increased the flexibility

of its cost base through outsourcing of certain customer service and

administrative operations and the commenced outsourcing of ground

handling services. The flexibility has been increased further through

increased possibility of using so called wet-lease production as a

complement to own production. SAS's liquidity was strengthened through

disposal of assets.

New financial targets were adopted by SAS in conjunction with the launch

of 4XNG. These new targets aim to reflect an operation that has reduced

its fixed costs, improved its profitability and strengthened its cash

flow. The financial targets are to reach an operating margin of a

minimum 8%, an equity/assets ratio in excess of 35% and a financial

preparedness of over 20%. At the end of the 2012/2013 fiscal year, the

market was characterized by reduced growth and significantly increased

capacity in parallel with a decline in the Norwegian Krona against the

Swedish Krona. These conditions are expected to continue and,

accordingly, SAS now expects that the financial targets that were

originally intended to be reached in 2014/2015 will now not be reached

until the end of 2015/2016.

Since SAS's operations are very capital-intensive, SAS works

continuously with optimizing its capital structure to maintain and

create the requisite conditions for the recurring investments in line

with maintaining a modern aircraft fleet. SAS has over the past years

completed the fastest modernization of the aircraft fleet in its

history. SAS has phased out aircraft models such as the MD80 and B737

Classic and phased in Airbus A320 and B737NG, which has led to the SAS

aircraft fleet having increased from 80% to 100% so called next

generation aircraft. SAS has also entered into agreement to purchase

additional new aircraft. Over the next seven years, SAS will invest in a

total of 42 new aircraft comprising 12 long-haul aircraft and 30 short

-haul aircraft.

The revised IAS 19 will be applied for fiscal years starting from 1

January 2013 and onwards. As a result of the changes to the Group's

fiscal year, the Group applies the amended standard for the fiscal year

starting 1 November 2013. The consequences of this mean, amongst other

things, that it is no longer permitted to defer recognition of certain

deviations in estimates (the "corridor" approach has been eliminated)

and all deviations in estimates are to be immediately recognized in

other comprehensive income.

Accordingly, the carrying amount of the Group's book equity at 1

November 2013 declined, in total, by about SEK 7 billion, from about SEK

11 billion to slightly more than SEK 4 billion. After adjustment for the

above, the equity/assets ratio would have amounted to approximately 15%

as of 31 October 2013, which can be compared with the reported

equity/assets ratio for the same date of slightly more than 31%. This

nonrecurring effect - which has been long known - will however not have

any significant impact on liquidity.

Based on the accounts as of 31 October 2013, after adjustment for the

negative nonrecurring effect on the Group's shareholders' equity from

the unrecognized pension deviations described above and after adjustment

for the capital injection of SEK 2 billion, the equity/assets ratio

would be strengthened by about 7 percentage points.

In light of the above and conditional on, inter alia, the Annual General

Meeting's approval of the proposed amendments of the Articles of

Association and the authorization for the Board of Directors to resolve

on the issuance of preference shares, the Board of Directors of SAS has

resolved to offer preference shares of approximately SEK 2bn in total.

By issuing preference shares, SAS's equity position will be

strengthened. The capital injected will primarily be used to strengthen

SAS financial ability for continued renewal of the aircraft fleet with

the aim of creating an optimized fleet for more profitable production,

but also to strengthen SAS financial preparedness and to reduce its

dependence on bank financing.

The Offer

The Offer, which includes approximately 4 million preference shares, is

divided into two parts: an offer to the general public in Denmark,

Norway and Sweden, which includes the Company's current shareholders in

these countries (the "Offer to the Public"), and an offer to

institutional investors ("Institutional Offer"), at an issue price of

SEK 500 per preference share [1]. The outcome of the Offer is intended

to be published on 24 February 2014. Payment can only be effected in

SEK. Brokerage commission will not be charged.

The Offer to the Public in Denmark, Norway and Sweden consists of

approximately 800,000 preference shares and the Institutional Offer

consists of approximately 3,200,000 preference shares. The final

allocation between the categories may deviate from the intended

distribution due to reasons including interest from current holders of

ordinary shares in SAS within the Offer to the Public in Denmark, Norway

and Sweden, and the ability to facilitate efficient trading on NASDAQ

OMX Stockholm. In the case of over-subscription current owners of SAS's

ordinary shares may be prioritised. In such an event, the minimum

allotment to SAS's ordinary shareholders will be 20 preference shares.

Application for subscription of preference shares shall be made during

the period from 10 February to 20 February 2014 for institutional

investors and 10 February to 19 February 2014 for the public in Sweden,

Denmark and Norway. If the Offer is fully subscribed SAS will raise

approximately SEK 2 billion in total, before issue costs which are

estimated to amount to approximately MSEK 50.

Following a fully subscribed Offer of approximately 4,000,000 preference

shares the number of shares in the Company will increase by

approximately 4,000,000 to approximately 333,000,000 and the number of

votes by approximately 400,000 to approximately 329,400,000,

corresponding to a dilution of approximately 1.2% of the shares and

approximately 0.1% of votes.

The Board of Directors may decide to increase the Offer to include up to

7 million preference shares in total. In such case, the company could

raise up to another approximately SEK 1.5 billion as part of the Offer.

The preference shares in summary

In accordance with the proposal for the amendment to the company's

Articles of Association that the Annual General Meeting, which is held

on 18 February 2014, is to resolve on, preference shares will have

preferential rights, ahead of common shares (and any subordinated

shares), to an annual dividend of SEK 50 per preference share ("Annual

Dividend") from the issue date. After five years, the annual preference

share dividend will increase by an equivalent one (1)% of the

subscription price per preference share and year until the annual

preferential right to a preference share dividend will total an amount

corresponding to SEK 50 plus an additional amount of five (5)% of the

subscription price. Dividends require a resolution by a General Meeting,

and that the Parent Company SAS AB has distributable unrestricted

equity. Holders of bonds issued by SAS in September 2013 have by way of

a bondholders' decision on 6 February 2014 approved an amendment to the

original terms and conditions pursuant to which SAS may propose and pay

dividends on preference shares in accordance with their terms, provided

that no event of default is outstanding under the terms and conditions.

The dividend is paid quarterly by one quarter (25%) of the Annual

Dividend, with the first record date scheduled for 5 May 2014, and is

accumulated in the event that the dividend paid were to fall below the

preferential rights entitled by the preference shares. The preference

shares do not carry any other entitlement to dividends. Each preference

share entitles the holder to one tenth of a vote compared with SAS

common shares.

Following a decision by the Board of Directors, the preference shares

can be redeemed, wholly or in part, at an amount per preference share

corresponding to 120% of the subscription price until the payment date

immediately following the record date on 5 February 2018 and 105% of the

subscription price thereafter, in both cases with the addition of any

amount outstanding per preference share ("Redemption Price") and the

accrued portion of preference share dividends. In order for preference

shares to be redeemed, the company must have unrestricted equity to the

extent that the Redemption Price exceeds the quota value (Sw.

"kvotvärde") of the shares.

SAS will apply for listing of the preference shares on NASDAQ OMX

Stockholm. The first day of trading of the preference shares is expected

to be on or about 7 March 2014.

Preliminary timetable for the Offer

Prospectus made public 7 February 2014

Subscription period for the 10 - 19 February 2014

public in Denmark, Norway and

Sweden

Subscription period for 10 - 20 February 2014

institutional investors

Annual general meeting 18 February 2014

Announcement of outcome 24 February 2014

Settlement date 28 February 2014

First day of trading on NASDAQ 7 March 2014

OMX Stockholm

Convertible bonds

In addition to the proposals aimed at facilitating the Offer, the Board

of Directors has proposed that the Annual General Meeting authorize the

Board of Directors to resolve on a convertible bond issue, with

deviation from shareholders' preferential rights, for a maximum amount

of SEK 2 billion, which may not exceed 130 million common shares upon

conversion, aimed at refinancing the outstanding convertible bond

amounting to SEK 1.6 billion.

Provided that the authorization is obtained, the Board of Directors

intends to carry out an issue of five year unsecured convertible bonds

in close connection with or shortly after the Offer, at a rate of

interest and conversion premium to be set at market terms and determined

through a book-building carried out at launch. The final decision to

launch a convertible bond is subject to favourable market conditions.

Bilateral facility with UBS and cancellation of RCF

SAS has entered into a EUR 150 million financing agreement with UBS AG,

London Branch. This financing agreement will be made available for

utilisation on 28 February 2014 and will be available to SAS until

January 2017. The interest rate is variable and based on prevailing

market conditions including SAS's creditworthiness. This agreement is

subject to, amongst other things, customary undertakings (including

negative undertakings) and terms.

Following completion of the Offer, the current revolving credit facility

due 2015 will be cancelled.

The Annual General Meeting

SAS's Annual General Meeting will be held on 18 February 2014 when the

Board of Director's proposal for authorisation to issue convertible

bonds and preference shares and required amendments to the articles of

association, will be considered.

Of SAS's four largest shareholders, the Swedish government, the Danish

government and the Knut and Alice Wallenberg Foundation have expressed

that they are positive towards voting in favour of the Board of

Directors' proposals to the Annual General Meeting. The Norwegian

government has declared that it is positive to SAS gaining an increased

flexibility to raise hybrid capital (in the form of preference shares

and convertible bonds), and have petitioned the necessary authorizations

from the Norwegian parliament in order to allow for voting in favour of

the proposals at the AGM on 18 February. Together, these four

shareholders hold approximately 57.6% of the outstanding shares and

votes in the company.

Advisors

Carnegie Investment Bank AB (publ), Nordea Bank AB (publ), Markets -

Investment Banking and SEB Corporate Finance, Skandinaviska Enskilda

Banken AB are acting as financial advisors, Joint Lead Managers and

Joint Bookrunners for the Offer.

JP Morgan is financial advisor as regards the potential convertible bond

issue.

Mannheimer Swartling is legal advisor.

Telephone conference

A telephone conference (in English) will be held today at 10.00 CET. The

conference call will be available as a webcast on the SAS website

www.sasgroup.net under Investor Relations. A replay of the conference

call will be available on www.sasgroup.net under Investor Relations.

For additional information:

Press Office telephone: +46 8 797 2944

SAS Group Investor Relations

SAS discloses this information pursuant to the Swedish Securities Market

Act and/or the Swedish Financial Instruments Trading Act and the

corresponding Danish and Norwegian legislations. The information was

provided for publication on 7 February 2014 at 07.30 CET.

IMPORTANT INFORMATION

The information in this press release is not an offer to acquire,

subscribe or otherwise trade in preference shares or other securities in

SAS. Any invitation to the persons concerned to subscribe for preference

shares in SAS will only be made through the prospectus that SAS expects

to publish on or about 7 February 2014.This press release may not,

directly or indirectly, be released or published in or distributed to or

within the United States, Canada, Japan, Australia or any other

jurisdiction where such action would require additional prospectuses,

filings or other measures in addition to those required under Swedish

law. The Offer is not made to, and application forms will not be

approved from, share subscribers (including shareholders), or persons

acting on behalf of share subscribers, in said countries or persons in

any other jurisdiction where applications for the subscription for

preference shares would contravene applicable laws or regulations, or

would require additional prospectuses, filings, or other measures in

addition to those required under Swedish law. Nor may the information in

this press release be forwarded or reproduced in any way that would

violate such restrictions or would give rise to such requirements.

Measures in violation of the restrictions may constitute a breach of

relevant securities legislation.

No shares paid and subscribed for nor preference share issued by SAS

("Securities") have been registered, and will not be registered, under

the United States Securities Act of 1933 (the "Securities Act") or the

securities legislation of any state or other jurisdiction in the United

States, and may not be offered, pledged, sold, resold, delivered or

otherwise transferred, directly or indirectly, within the United States

or to U.S. persons as defined in Regulation S under the Securities Act

("Regulation S"). The Securities are being offered outside the United

States in reliance on Regulation S. There will not be any public

offering of Securities in the United States or to U.S. persons. This

press release may contain forward-looking statements that reflect SAS

current view of future events as well as financial and operational

development. Words such as "intend", "assess","expect", "may", "plan",

"estimate" and other expressions involving indications or predictions

regarding future development or trends, not based on historical facts,

identify forward-looking statements. Forward-looking statements

inherently involve both known and unknown risks and uncertainties as

they depend on future events and circumstances. Forward-looking

statements do not guarantee future results or development and the actual

outcome may differ materially from forward-looking statements.

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[1] The subscription price in the Offering has been determined by the

Company's Board of Directors, in consultation with and by recommendation

from Carnegie, Nordea and SEB, based on the assessed demand from

institutional investors after a form of book-building carried out during

the period from 27 January to 4 February 2014.