WOW Air is fighting to stay alive, though I'm not exactly sure to what end. On Sunday night we learned that WOW Air seemed to basically be out of options: -- In November 2018 it looked like Icelandair would acquire WOW Air, though that deal ended up falling through -- After that, Indigo Partners (which…
Continue reading: WOW Air Gets Another Lifeline (Bonds Converted Into Equity)
Share your questions, experiences, and thoughts below.
All this likely does is buy them a bit more time by not having any more bondholder covenants that they are likely already in breach of. Doesn't solve the underlying problem of lack of cash. My guess is at this point they are well into a negative valuation, with the liquidation value much less than their outstanding obligations.
OK, I'm thinking it's time for Lucky to get on a plane and for Tiffany to post some Vietnam trip reports. 🙂
Wonder what Indiego saw that made them not want to invest? They were in conversations for quite a while
They could perhaps approach Blizzard about putting World of Warcraft livery on their planes like Asian does with Hello Kitty. They have the perfect name already.
i'd hardly call a conversion from debt to equity a lifeline...WOW is selling itself off just to stay alive. I've been through a move like this at a previous tech company and it's only downhill from here. I'd say the shareholders just want an out, they'll peddle to whomever calls at this point.
@Memento
One of the best comments so far. But WoW is probably 15 years too late for such PR stunt.
I agree with most that converting doesn't solve cashflow problem. I see no reason why bond holders would do that either. In bankruptcy bonds hold more value than equity. You mostly convert when company is doing very good, equity is high.
Unless, the new voting rights of the bond holders can save WOW.
@Eskimo - bondholders come before shareholders, but secured debtors come before bondholders. WOW has already had an aircraft repossessed, and there's a limit to how much farther Keflavik will let them skate on landing fees.
Reducing cash demands for interest on the converted bonds (if they were making those payments) will help, but I doubt it's enough to stop the flow of cash out the door.
You're right in that you normally convert when the company is prospering, but the other time you convert is when if you don't, the company is going to fold anyway and your bonds are about to become pretty much worthless, so it's your only option to get something back out of the investment.
Hey! What happened to the Eternal Optimist? I LOVE WOW and have flown them 1-2 times
a year and think they are great! And I speak from experience with other low-cost airlines
around the world. Give them a chance!
Doesn't really mean much. Bond holders know they aren't getting any of that money back. So they probably agreed to convert to equity in the hope that they can get something if WOW finds an investor.
They should contact the Italian Govt for a bail out. What could possibly go wrong.
@SEAguy At least we get the occasional trip report here (View from the Wing doesn't seem to have done any in ages).