Banks set low target for GPA refinancing: Raising only half planned equity will trigger rescue package

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The Independent Online
GPA GROUP, the financially stretched aircraft leasing company, needs backing from investors for only half its planned dollars 200m equity issue to trigger its long-delayed refinancing.

The company needs to complete the equity-raising exercise, involving the issue of 200 million new shares, in order to gain approval for a dollars 3.6bn debt rescheduling and the deferral or cancellation of three quarters of its dollars 11.9bn aircraft order book.

The group's banking syndicate, led by Citibank and Swiss Bank Corporation, is understood to have told GPA that, provided existing and new shareholders commit themselves to susbscribe for at least dollars 100m in shares, the rescheduling will go ahead. This is a much less onerous target than hitherto thought.

The banks have said they would be prepared to sign the debt rescheduling provided there was firm commitment to about half the new equity and they could feel assured that the remainder would be raised in the following three months. GPA is hoping for an outline agreement by 16 April but might need a further extension of bank deadlines to complete.

Agreement on this would trigger agreements GPA has reached with its aircraft suppliers to reschedule dollars 8bn- dollars 9bn worth of aircraft orders.

With a number of GPA's shareholders facing financial difficulties, up to 40 per cent of the fresh equity might have to be raised from new investors. Tony Ryan, GPA's founder who has an 8 per cent stake, and fellow directors and staff, who own 4 per cent, are not expected to subscribe. Nor is Air Canada, GPA's second- largest shareholder with 9.58 per cent.

GPA is in talks with about half a dozen potential investors, mostly in the US where it has employed an investment house, James D Wolfensohn.

The group's worries appear to have been eased with confirmation that the Irish government would fund Aer Lingus's dollars 17.6m contribution to the issue. The Irish premier, Albert Reynolds, is anxious not to see the collapse of GPA, which supports more than 1,000 jobs in the Shannon area.

GPA is hopeful that most of its Japanese shareholders, led by Mitsubishi Trust and Banking Corporation, will take up their rights.

The only manufacturer that GPA has not yet reached agreement with is McDonnell Douglas, owed dollars 500m for five MD-11 aircraft scheduled for delivery this financial year. The agreement with the banks has been reached on the assumption that this dispute will not be resolved, although both sides have returned to the negotiating table in the last fortnight.