UPDATE 2-SAS sells Spanair for 1 euro, takes big charge

Fri Jan 30, 2009 5:50pm EST

(Adds Stockholm dateline, detail, SAS comments, background)

STOCKHOLM/MADRID Jan 30 (Reuters) - Scandinavian airline SAS (SAS.ST) said on Friday it had struck a deal to sell most of its money-losing Spanair unit to a Spanish consortium for one euro, leaving it with a 2.2 billion Swedish crown ($266 million) charge in the fourth quarter.

SAS, which has been struggling in recent years to turn itself around and become more profitable, had abandoned an earlier effort to sell Spanair in June of last year after it was unable to secure a deal on acceptable terms.

SAS said it sold 80.1 percent of Spanair to a public-private consortium from the Spanish region of Catalonia but the Scandinavian firm will still be responsible for Spanair debts following the deal.

"In summary, the financial effects from Spanair's 2008 result and this transaction on the SAS Group in 2008 will be a negative effect of 4.895 billion crowns reported as discontinued operations in the 2008 financial statements," SAS said.

Of that total, 2.72 billion crowns was booked in the first three quarters of last year while 2.18 billion will be accounted for in the fourth-quarter results.

The fourth-quarter charge consists of a 712 million crown capital loss, 907 million for one-off restructuring costs and an additional 560 million for Spanair losses in the quarter.

The consortium groups Catalana d'Iniciatives -- a private equity group including some of Spain's biggest banks and builders -- with regional tourist authorities, a Barcelona exhibition centre and businessmen in local tourism.

SAS, half-owned by Sweden, Norway and Denmark, will own the remaining 19.9 percent of the Barcelona-based airline and retain Spanair's debt, which SAS said last March was around 260 million euros ($334 million).

UNPRECEDENTED CONDITIONS

SAS will also continue to manage the firm on an operational basis, Iniciatives said.

"Due to unprecedented market conditions, the transaction will have a significant negative impact on the Q4 earnings of the SAS Group," said SAS Chief Executive Mats Jansson in a statement.

Iniciatives Empresarials Aeronautiques said the new Spanair would boost capital to raise 100 million euros and would launch a three-year plan to swing the airline back into profit.

Spanair lost 515 million Swedish crowns ($62.35 million) in the first half of 2008.

"Following the transaction, 99 million euros of existing interest bearing indebtedness to SAS will remain outstanding and be amortized in line with Spanair's future cash flow generation," SAS said.

"In addition SAS will convert 20 million euros of existing loans to Spanair into equity in Spanair, and repay Spanair's external loans of 18 million euros."

SAS said it will continue to lease 18 aircraft to Spanair on market terms and remain as guarantor of 36 million euros for some operational undertakings of Spanair for a limited period.

SAS put the carrier up for sale in 2007 but potential buyers shied away from a purchase, deterred by high fuel costs, falling demand and overcapacity in the Spanish market. Two months after SAS abandoned its attempt to sell Spanair, one of the airline's planes crashed on takeoff from Madrid, resulting in more than 150 deaths.

(Reporting by Adam Cox in Stockholm and Ben Harding in Madrid; editing by Martin Roberts, Bernard Orr)

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