Sunday, May 22, 2016

Chinese will enter through August, the consortium that bought the TAP – Express

It has been signed the purchase agreement and sale of shares that returns 50% of the capital of TAP to the public sphere. The validity of the MoU sealed between the State and the private shareholders of the airline in February ended Saturday. The resolution of the Council of Ministers which frames the choices of the Government in relation to TAP was approved on Thursday, found the Express, validating that the agreement was signed this week by Parpública and the Atlantic Gateway consortium.

the agreement now includes the entry of the Chinese HNA in the capital of the consortium that joins Portuguese businessman Humberto Pedrosa and American David Neeleman. This investment by the Chinese group was already foreseen in the Memorandum of Understanding signed on January 6 – “the Portuguese State authorizes ever since the entry into the capital of Atlantic Gateway by HNA, a percentage to be agreed between the shareholders of Atlantic Gateway and HNA “- but now it is black and white:” we are in negotiations for the HNA stay with a minority stake in the consortium, less than 10%, “forward Humberto Pedrosa to Expresso.

It should be recalled that in November, HNA said it had € 428 million to stay with 23.7% of the Brazilian airline Azul, that one of the new owners of TAP, David Neeleman, is president and founder. Now, with the entry into the capital of the Atlantic Gateway consortium, the indirect participation of HNA TAP “up to 20%”, said Humberto Pedrosa, ensuring that will remain majority shareholder.

The entrance of HNA in consortium’s capital will take place at the time of closing of the operation, when the transfer of shares of private to the state. Shareholders set a maximum period of three months (until August) for the deal to be closed, but Humberto Pedrosa expects the outcome to happen in the next two months.



Setting the details

“This agreement fully complies with the memorandum of understanding we set together and closes definitively the will of the parties,” says the Express Minister of Planning and Infrastructure . Only “details were limited,” explains Pedro Marques. Among them, the powers of company bodies, the shareholder structure and future conditions for a possible exit from the Atlantic Gateway airline’s capital. Ensuring that “the state will not leave the company,” the minister advances that has now established a “value threshold from which the Atlantic Gateway can sell all or part of its stake in TAP.”

This output “is a possibility,” stresses Humberto Pedrosa without the value of the level. The specifications of the privatization of TAP has a clause that determines the downtime of the transfer of the shares for five years. But “if the company deliver results and need funds, we can use the funds without this meaning the sale of the stake of the Atlantic Gateway.” A dispersion in stock market or a capital increase are thus hypotheses that could happen “within four to five years,” says the entrepreneur.

Moreover, as was foreseen in the memorandum, the state will pay € 1.9 million to get 50% of TAP (instead of 34% as had been defined in the previous agreement) outcome of negotiations with Gateway consortium, which had 61% of the company’s capital and is now 45% and may reach 50%, with the acquisition of capital available to workers.

The State undertakes to not hold a stake of more than 50% in TAP, going to appoint the president of the company’s board of directors, composed of 12 members – six chosen by the Executive and six by the private consortium . Already the executive committee remains with three members appointed by private shareholders, led by Fernando Pinto.
Pedro Marques confirmed to the Express that the powers of the executive committee remain unchanged from those described in the MoU, detalhando- now the issues that require the approval of two thirds of the members of the board, as the budget, the accounts or the strategic plan of the company. The minister reiterated that have not made invitations to the company’s board of directors, which will only be set at the time of closing of the transaction.



Next Steps

With the signed agreement, shareholders will now proceed with the renegotiation of the debt with the creditor banks. According to the latest report and accounts of the TAP (see box opposite), released this week, the airline closed 2015 with a bank debt of € 630 million. Under the privatization process of the TAP group (agreement reached with the previous government), “there was place on November 12, 2015, the restructuring of bank debt, with the main changes related to the maturity of the loans,” the report reveals . In 2014, almost 80% of the paid bank debt (€ 515.9 million) had maturities of one year. Late last year, that figure dropped to € 108.1 million. The purpose of negotiation with the bank, confirms Humberto Pedrosa to Expresso, is that all loans start to have a maturity of seven years and interest of around 3%.

The following steps assume that the Authority competition is notified and that the State proceed with the public offering (IPO) of 5% of the TAP workers. Only at the end of this process, after the transfer of shares it is that TAP will notify the National Aviation Authority (ANAC) on the new shareholder ownership group. At that time, the consortium’s composition already include the participation of HNA. The regulator will review again, the company’s effective control is European and has 90 days to rule. With the closing of the transaction until August, the decision of the ANAC may only be known in November. Until then, remember, the company management is in current management, following the ANAC’s decision to proceed with protective measures because the previous company’s privatization model, where private were 61% of the company ( see box opposite).

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