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Published on Tuesday, September 3, 2019

Clock ticks for Norwegian as it asks for more time to repay loans

Low-cost airline Norwegian will find out in less than two weeks whether its attempt to secure more time to repay $380 million of borrowings has been successful.

The airline has offered to put up its valuable take-off and landing slots at Gatwick as collateral to extend the time in which it is supposed to pay back the loans.

One loan is due to mature in December, and the other in August 2020. The airline, which is the third largest at Gatwick after British Airways and easyJet, has asked for the loans to be extended to November 2021 and February 2022 respectively.

A bondholders' meeting will take place on September 16.

"What we are doing now is to make sure that we have sufficient liquidity for the next twelve months," said interim chief executive Geir Karlsen, who took over when Bjorn Kjos, one of the airline's founders, stepped down in July.

One city analyst, Daniel Roeska at Bernstein, told CNN Business: "They are managing the crisis as best they can but they are on the verge of a cliff edge."

However, analyst Jacob Pedersen at Sydbank said it was 'a fine solution to the issue', adding: "We have to see whether the bondholders will think the same."

Norwegian has been hit with several problems recently, including the forced grounding of its fleet of Boeing 737 MAX jets after the aircraft type was involved in two fatal crashes.

With no news yet on when the aircraft will be airborne again, Norwegian announced last month that it was axing all of its transatlantic flights from Ireland.

And it revealed yesterday that payment delays from credit card companies reduced its working capital by around $439 million in the second quarter of this year, compared to the same period of 2018.

The delay wiped out the $353 million it raised in a share issue in March, as well as the $102.6 million it made from its recent sale of a stake in a Norwegian bank.

If bondholders refuse to extend Norwegian's debt, the airline could be forced to reconsider selling to a bigger player.

It has previously received - and rejected - takeover offers from British Airways' parent IAG and from Lufthansa.

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