Bankruptcy Judge Michael Wiles on Friday approved a $700 million financing package for SAS AB from Apollo Global Management, though he said features of the deal concern him, Bloomberg News reported. The financing, divided into two $350 million draws, will allow Apollo to convert the debt into stock in the bankrupt airline or participate in an equity raise tied to SAS’s eventual exit from chapter 11 protection under certain circumstances. Judge Wiles called the financing “unusual” and questioned whether it was legally viable. “I will approve the arrangement, although not without some significant reservations,” Judge Wiles said in a hearing held by telephone Friday. “To be honest, I still have some misgivings about the whole idea.” Judge Wiles said the structure is akin to SAS selling options on stock that does not yet exist, a concept he found legally murky. While questioning SAS advisers in court, he asked whether the deal might dissuade potential suitors for the airline from making proposals that would ultimately be better for the company’s creditors. Lawyers and bankers for SAS emphasized that the airline has the ability to terminate Apollo’s options by paying fees to the asset manager. They also argued that the deal is a substantially cheaper way to finance its operations than a standard loan arrangement and is allowed under bankruptcy rules.
