TAP secures €946M state loan, possibility of €254M more
Portugal's national airline announced on Friday that a final agreement had been reached between all parties for a contract regarding state financing.
TAP, Portugal’s national airline, announced on Friday that a final agreement had been reached between all parties for a contract regarding state financing, which foresees a loan of up to 946 million euros, with the possibility of a further 254 million euros.
“On July 16, 2020 and after the respective approval by the Board of Directors of TAP SGPS, the definitive agreement of all parties involved in this negotiation process (…) was reached (…) thus meeting the conditions for the formalisation of all the contractual documents deemed necessary”, said the airline in a statement sent to the Securities Markets Commission (CMVM).
In the statement, TAP stresses that the execution of the planned operations “is subject to compliance with several previous conditions, including the applicable regulatory authorisations, as well as internal approvals”. It recalls the announcement earlier this month that the Portuguese state had reached an agreement in principle with the private shareholders of TAP SGPS that was expected to result in a change in the company’s shareholder structure, and says that negotiations have taken place in recent weeks.
In addition to the interest-bearing state loan of 946 million euros to the TAP Group, to which may be added a further 254 million euros, the negotiations related to the acquisition by the state of shares, “economic rights and a part of the ancillary services of TAP SGPS shareholder Atlantic Gateway. The latter company is a consortium jointly controlled by Brazilian-American businessman David Neeleman and Portuguese coach magnate Humberto Pedrosa that owns 45% of TAP SPGS.
Under the deal, the state would be left with a total stake of 72.5% in TAP SGPS, having purchased a 22.5% stake for 55 million euros from Atlantic Gateway, while the latter’s remaining 22.5% would be transferred to HPGB, the company through which Pedrosa holds his stake held in the joint venture.
The negotiations also had in view the signing of a memorandum of understanding under which Azul, the company through which Neeleman holds his stake in Atlantic Gateway, agrees to waive its rights as holder of convertible bonds issued by TAP SGPS.
The TAP statement comes the day after Portugal’s president, Marcelo Rebelo de Sousa, promulgated legislation approved by the cabinet authorising the state to increase its stake in TAP to 72.5%. A statement on his official website says that the president of the Republic, “from the outset, ruled out the possibility of nationalisation or appropriation by instruments of public law” – a reference to a situation in which the state would by compulsory purchase take over all the shares in TAP SGPS, rather than reaching an agreement with the consortium on a commercial transaction.
