“TAP needs time and investment capacity”

  • ECO News
  • 19 November 2019

TAP's financing operation "is only available to companies that generate confidence among institutional investors", says Miguel Azevedo, of Citi, one of the joint book runners of the operation.

From 8:30 a.m. this Tuesday morning, in London, the president of TAP, Antonoaldo Neves, has his true market test, with the airline’s presentation to international investors. The goal is to make an issue of 300 million euros to extend the term of the debt and finance the renewal of the fleet of aircraft. “An airline in the development and growth phase such as TAP needs time and investment capacity, this operation will allow this by giving a long-term structure to TAP’s debt in line with the profile of its cash flows,” Miguel Azevedo, head of investment banking at Citi, told ECO News. Citi is one of the joint book runners of the operation, alongside Morgan Stanley and JPMorgan.

TAP’s chief executive officer knows what the difficulty of the operation is for a company with the airline’s history. Until now, TAP had no rating at all, which is a mandatory condition for carrying out the operation. And what came out was better than expected.

Standard & Poor’s was the first agency to test TAP’s operation and classified it as a speculative investment at three levels of investment grade. The rating is identical to that of American Airlines, above the ratings of companies such as Turkish Airlines, GOL or SAS, and to a notch of Air France (BB). Only companies like Lufthansa and AIG are at the investment level.

“This financing option is only available to companies that generate confidence with global institutional investors”, said Miguel Azevedo, from Citi. TAP is renewing its aircraft, the average age of the fleet has risen from 14 to 7 and it is necessary to extend the term of the debt, today in the 24 months and mainly banking, hence the need for long-term financing.

The executive chairman of TAP started the roadshow with investors, organized by Morgan Stanley, on the morning of Tuesday in London, and will end on Friday in Lisbon. Thus, the pricing of the issue should only be known on Monday of next week, determined the ECO News. Even so, the possibility of being known at the end of Friday is not ruled out.

These roadshows – or ‘air shows’, as they are known inside the company – are essentially one to one meetings and not extended events. Thus, with two days of presentations in London, on average with six to seven meetings a day, Antonaldo Neves and his team should meet with about 40 investors. Europeans or Americans with exposure to Europe.