TAP SGPS fails to pay €177 million debt to Azul

TAP SGPS, which had until June 23 to pay a €177 million debt from 2016 to the Brazilian airline Azul, has defaulted on the loan with the airline now having to go to court to try and recover the money.

The holding company, which no longer has any stake in the airline and was renamed SIAVILO, had until June 23 to repay the principal and interest on the bonds, according to the payment note sent by Banco Montepio on May 27 as reported by Jornal de Negócios.

At stake is €235.27 million, of which €176.9 million is owed by Azul and €58.6 million by State public umbrella company Parpública which manages Portugal’s public companies, which results from the sum of the invested capital (€90 million by the Portuguese company and €30 million by the Portuguese public company) to the accrued interest. Unlike Azul, Parpública voted against the default resolution at the bondholders’ meeting.

Azul had been expecting the default since over the past two years TAP SGPS which is now 100% State-owned, has been divesting all of its assets, a process that was accelerated at the start of this year.

Since 2021, the holding has not had any shareholding position in the airline TAP SA, having become a shell company with no assets.

In 2024 it shed its shareholding in the former Groundforce (now Menzies Aviation) while this year it was announced that Portugália had been sold to TAP along with Cateringpor and UCS.

Last week Azul told the online news source ECO that it had been preparing for a default on the contract after TAP SGPS had become an assetless shell company.

One of the reasons it may have done so was to clean TAP’s books of any liabilities in view of its forthcoming total or partial privatisation later this year or next year.

In addition to being practically without assets, TAP SGPS was left without corporate bodies, as ECO had reported.

Between the end of March and the beginning of June, the members of the board of directors, the fiscal council and the statutory auditor resigned. According to the latest available accounts, the holding company had a highly negative net position, with negative equity of €1.34Bn.

In the absence of paying, the Bondholders will take the whole matter to the courts to try and claw back the money.

If the now called SIAVILO has to advance the payment, the amount spent by the Portuguese State on TAP since 2016 will rise from €3.431Bn to €3.608Bn.

The Brazilian airline points out the damage that such a court case would have on Portugal’s reputation in the eyes of overseas investors in Portugal for not honouring contracts on loans taken out.

A source at Azul said: “TAP is being divided into a toxic asset TAP (SIAVILO SGPS) without assets to pay its debts that it had taken on with private creditors (namely overseas investors), which in good faith lent money to TAP S.A. which is now being privatised.