Last minute deal staves off TAP nationalisation

An 11th hour deal between the Government and private shareholders over the future of Portugal’s national airline TAP has been brokered after talks continued through the small hours on Thursday.

Says ECO Online, the agreement between the Government and the brokers for airline Azul owned by American-Brazilian airline mogul David Neeleman means that TAP will now not need to be nationalised in order to prevent its collapse.
“We have reached an agreed solution which will avoid the bankruptcy of a company which is essential to the country and will ensure there will not be further litigation in the future,” announced the Minister of Infrastructures and Housing Pedro Nunes Santos on Thursday.
It means that the consortium Atlantic Gateway controlled by Portuguese entrepreneur Humberto Pedrosa and airline mogul David Neeleman will be dissolved leaving Pedrosa the sole private individual shareholder in the airline.
Azul, owned by David Neeleman, will no longer have to meet a Government red line which insisted on giving up the right to convert a €90 million loan made to TAP into share capital.
Now, with the removal of this red line, the State will now own 72.5% of the airline. The remaining 30% will be held by Humberto Pedrosa ( before he had held 25%) and TAP staff (5%).
Meanwhile, the Government will press ahead with a €1.2Bn cash injection of public money to help finance the reopening of the airline’s operations despite a court injunction from a business association based in Porto which is against a restructuring that focuses the airline’s activities on its Lisbon hub.
On Thursday morning lawyers representing the two parties were said to be dotting the ‘i’s and crossing the ’t’s to ensure the agreement was watertight.
It now means that an agreement to nationalise TAP which was expected to be signed on Thursday by the Council of Ministers, will not go ahead.
The State will now buy 20% of the shares that Atlantic Gateway has today in TAP (45%) while at the same time Humberto Pedrosa will buy David Neeleman’s share in the company and become the main private shareholder.
Neeleman will get €55 million in return for his share and leave TAP and the State will have the controlling share of the company.
The result in practice is that TAP will basically revert back to being a public-owned company because it will now have the Golden Share in the airline with an attendant impact on Portugal’s budget deficit.
But despite the State owning more than 50% of the company, it does not wholly control its management which will enable the TAP shareholder restructuring to technically avoid having a direct impact on the annual budget deficit, but rather just on Portugal’s overall public debt.