GPA and banks agree on dollars 2.5bn restructuring

Click to follow
The Independent Online
GPA, the embattled aircraft leasing group, has reached agreement on a dollars 2.5bn ( pounds 1.66bn) financial restructuring with its leading bankers, aircraft suppliers and shareholders.

Under the deal, announced yesterday, the Irish leasing group will defer dollars 1bn of loan repayments due in the next two years to late 1996, reschedule a further dollars 1bn- dollars 1.5bn worth of aircraft that had been due for delivery in 1993 and 1994, and raise another dollars 200m in equity through a rights issue. However, penalty payments on cancelled aircraft orders will cost GPA dear, helping force it into a 'substantial loss' for the current financial year.

GPA also faces a bill estimated at upwards of dollars 40m to meet the fees and legal costs of its debt restructuring. It has employed six law firms along with myriad financial and other advisers in Britain, Ireland and the US to help it draw up the new banking agreements, one of which is 300 pages long and contains 50 appendices.

GPA, which has debts of dollars 3.6bn, has thrashed out the agreement over the past six weeks with its 24 core banks and three main aircraft suppliers.

It is expected to take a further six to eight weeks to obtain the approval of the remaining 100 banks in its banking syndicate. During this time, GPA is asking for a further waiver on its banking covenants.

The agreement with Boeing, Airbus Industrie and Fokker will reduce the value of aircraft on firm order to dollars 4bn compared with the dollars 12bn-worth GPA was committed to buy at the time of its failed public share offer last summer. The further cancellations and deferrals mean that GPA has now rescheduled more than half the dollars 4.9bn worth of aircraft it had been due to take delivery of in the next two years.

The only manufacturer GPA has yet to reach agreement with is McDonnell Douglas. GPA had 34 aircraft on firm order from the company, of which 21 were due for delivery before January 1995.

GPA's success in rescheduling more of its order book has enabled it to reduce the amount of equity it plans to raise from existing shareholders from an initial estimate of dollars 300m to dollars 200m.

Maurice Foley, GPA's deputy chairman, said the agreement would enable the group to continue to meet its obligations to other creditors, principally bondholders, who have dollars 1.5bn of unsecured debt.

The agreement represented a fair balance between the interests of shareholders, lenders and aircraft suppliers, he added, and would enable GPA to reduce its debt burden substantially over the next three years.

Provided the agreement is sanctioned by GPA's banking syndicate, the group is expected to press ahead as soon as possible with the dollars 750m sale of a further package of aircraft leases, known as ALPS2.