GE talks lift hopes on GPA debt

HOPES were rising last night among bankers to GPA, the embattled Irish aircraft leasing group, that GE Capital Corporation is about to agree in principle to take a large minority stake, write Peter Rodgers and Michael Harrison.

This would allow the GPA board, headed by Tony Ryan, to tell bondholders at a crunch meeting in New York tomorrow that a dollars 25m ( pounds 16m) capital repayment will be made on time when it falls due next Tuesday.

GPA has the cash to make the payment, but it is the first of dollars 200m of repayments due by the end of June. The board cannot promise to make the initial payment to bondholders unless it is sure it can honour the rest.

This requires an agreement that new equity will be forthcoming from GE Capital, the finance arm of General Electric, the US giant.

The new equity would trigger a dollars 3.5bn rescheduling of bank debt. But if a deal is not reached the company is likely to declare a debt moratorium.

This would still leave bondholders free to force the company into examinership, the Irish equivalent of administration. A senior banker said the banks were strongly against this, arguing there would be much less of GPA left afterwards.

The deal with GE would give the US firm a large stake in a restructured GPA equity in return for a capital injection in a 'strategic alliance'. GPA's debts would not appear on GE's balance sheet.

After an equity deal and bank rescheduling, GPA would ask bondholders to reschedule their dollars 2bn debts and convert part into equity. Once complete, there would be fundamental changes on GPA's executive board.