OSLO (Reuters) – Norwegian Air (NWC.OL) could run out of cash by mid-May unless its proposed financial rescue plan is approved by creditors and shareholders, the budget carrier warned on Monday.

If bondholders, leasing companies and shareholders give a green light, the plan may help Norwegian survive the coronavirus outbreak, which has grounded 95% of its fleet, leaving just seven aircraft in operation.

But the planned swap of up to $1.2 billion worth up debt into equity will hand majority ownership of 53.1% to the company’s lessors, while bondholders would own 41.7%, leaving current shareholders with just 5.2%, the airline said.

The move would allow Norwegian to tap government guarantees of 2.7 billion crowns ($255 million), which are dependent on the company reducing its ratio of debt to equity, and which would come on top of 300 million crowns it has already received.

It is “critical to get access to the state aid package by mid-May before the company runs out of cash,” Norwegian said in a presentation to investors.

It warned that taking the company through an alternative route of bankruptcy proceedings in Norway would destroy much of the value left in the firm and that most creditors would likely recover little of their claims.

The state package of guarantees should be sufficient to cover liquidity needs until the end of the year, although the high degree of uncertainty could lead to a further need for cash before operations normalise, Norwegian cautioned.

Currently only paying invoices vital to its minimum operation, such as salaries for staff still employed and critical IT infrastructure, Norwegian has put payments for ground handling, debt and leases on hold.

“This restructuring plan points in the right direction in saving the company from bankruptcy, and of course the dilution of the existing shareholders will be massive, but nonetheless that is I think what is appropriate and needed,” Sydbank analyst Jacob Pedersen said.

Rapid growth has made Norwegian Europe’s third-largest low-cost airline and the biggest foreign carrier serving New York and other major U.S. cities. But with the expansion came debts and liabilities of close to $8 billion by the end of 2019.

Last week, the company reported that four Swedish and Danish subsidiaries had filed for bankruptcy and it had ended staffing contracts in Europe and the United States, putting some 4,700 jobs at risk.

Norwegian’s shares were down 4.6% at 1100 GMT on Monday, and have plunged 85% year-to-date.

The company aims to gradually emerge from the COVID-19 crisis with a reduced short-haul and long-haul network, and is targeting a return to normal operations in 2022, it said.

After the crisis, the aim will be to operate 110-120 aircraft, down from 147 currently, while its earlier plans had been to expand to 168 planes.

But the plan requires backing from bondholders in each of four separate votes planned for April 30, from shareholders at an extraordinary general meeting scheduled for May 4, and from leasing firms.

The airline also plans to raise 400 million crowns from selling new shares.

Sydbank’s Pedersen said it was difficult to tell whether the different stakeholders would support the plan, but there were signs of hope.

“It seems there are constructive negotiations going on … it’s not over yet for Norwegian, but I think we have to wait and see.”

Editing by Jan Harvey and Mark Potter

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