TAP needs €600M-€700M cash injection

Portugal’s infrastructure minister has thrown the gauntlet down to the private shareholders of national airline carrier TAP to reveal how much the company actually needs to survive.

Pedro Nuno Santos said in a parliamentary hearing that didn’t believe the €350 million to €400 million suggested by shareholder Humberto Pedrosa was adequate to meet TAP’s actual financial needs.
And according to sources that leaked information to the online news source ECO, the airline in fact needs between €600 million and €700 million to meet company commitments in order to get back to some semblance of normality in the second half of the year.
TAP’s entire fleet has been grounded since last month, with the exception of some flights to Madeira and the Azores, while 90% of its workers are laid off.
The company is now in negotiations with the Government over a recapitalisation plan to ensure adequate cash flow from June.
Humberto Pedrosa says that TAP will need a loan backed by the State of between €350 million and €400 million, but also admitted that a capital call to shareholders would be required by 2021.
The Government has made clear through the Minister of the Economy, Pedro Siza Vieira and the Minister of Infrastructure, Pedro Nuno Santos that it is not open to make cash injection twice and that the sum of two injections (a private loan backed by the State and a shareholder capital call explains the “revised and increased financial requirements”.
In effect, the Government option would be to issue bonds that would be convertible into shares in a similar model to the one followed to recapitalise the banks after 2011.
The operation would be carried out once and within the context of a change of management at the airline, and it was this message that the minister of infrastructure made clear on Wednesday at the parliamentary hearing.
Pedro Nuno Santos said that any State intervention in the airline would “imply that the State, through the Government, would be involved in all the decisions that would be taken in the coming months.”
“It’s a different tune now regarding TAP” he stressed, adding that, “if it’s the Portuguese people that are paying the piper, then it should be the Portuguese people that are calling the tune.”