TAP’s capital increase could reach €1.7 billion

  • ECO News
  • 28 December 2021

In addition to the €536 million it will inject into the company this year, the government intends to convert the emergency funding of €1.2 billion allocated in 2020 into capital.

On the same day that TAP announced David Neeleman’s departure from the company’s capital, a rescue aid of €1.2 billion was published in the country’s Official Gazette. It was July 2020 and the pandemic had left the entire fleet on the ground. Now, about a year and a half later, and with the green light from Brussels to the restructuring plan, the financing will be converted into capital. The government’s intention is that this happens this week, in addition to the capital increase already planned.

The loan had a planned repayment date of September 1, but it was extended until next Friday, December 31. Since the restructuring plan was presented, the intention was to convert €1.2 billion into capital. According to what ECO found out from a source connected to the process, the government’s intention is to do it this year, avoiding a new postponement of the deadline.

This means that TAP SA’s 536 million capital increase to complete the amount planned for this year will be accompanied by the conversion of that financing into capital, totalling €1.7 billion. As the operation is subscribed solely by the Treasury, TAP SGPS is diluted to such an extent that it no longer has a stake in TAP SA. In other words, the holding company no longer has a stake in the company that owns the aviation business, as explained at the Minister for Infrastructure’s press conference last Tuesday.

The restructuring plan provides for an injection of €3.2 billion by the state. In addition to the rescue aid of €1.2 billion, which will now be converted into capital, €998 million will have to come into the company in 2021, to which €990 million will be added in 2022.

This year has already seen a first capital increase of 462 million, which brought into TAP the first tranche of compensation for the losses of covid-19. As ECO reported and as confirmed by the Finance Minister, by the end of the week the State will provide another €536 million. Part of this money will also be Covid-19 compensation, given that two new tranches with a total value of €178.5 million have been approved.

Part of the money planned for next year will be placed in the airline via a State-guaranteed loan of 360 million, maturing in one year. At the end of the term, the state injects this amount into TAP, which reimburses the investors.