TAP sale may recover only part of state bailout

Portugal’s government is preparing to choose a new strategic partner for TAP as early as September, aiming to complete the sale of 49.9% of the airline, but the proceeds are unlikely to cover the €3.344 billion injected by the state during the pandemic.

The state support total includes a €1.2 billion emergency loan later converted into equity, €59 million in accrued interest, €569 million in Covid-related compensation and €1.516 billion in capital increases under TAP’s restructuring plan. Binding offers were submitted on July 29 by Air France-KLM and Lufthansa, but their terms have not been disclosed.

In an assessment prepared for ECO, financial analyst Nuno Barradas Esteves estimated TAP’s economic value at between €1.948 billion and €2.073 billion, implying a price of roughly €972 million to €1.035 billion for the 49% stake being sold. With a competitive premium of 10% to 20%, the state’s proceeds could rise to between €1.116 billion and €1.241 billion, still leaving more than €2.1 billion unrecovered.

There are three possible ways to narrow that gap: additional earn-out payments linked to TAP’s future performance, dividends on the 50.1% stake the state would retain, and a later sale of the remaining capital. But each route is uncertain or politically difficult. Even if TAP paid €100 million a year in dividends, the state’s share would imply a recovery period of about 42 years for the remaining amount.

Originally published at Eco.pt