GPA considers debt moratorium: Board meets as aircraft leasing group fights for life

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The Independent Online
GPA, the embattled Irish aircraft leasing group, is considering a moratorium on all repayments of its dollars 5.5bn debts if last-ditch attempts to find new shareholders fail over the next couple of weeks.

This was one of the options under discussion last night at a crunch board meeting being held at Schroders, the group's merchant bankers, as GPA fought for survival.

The crisis comes against the background of a deadline looming later this month for repayment of dollars 200m ( pounds 130m) to bondholders.

A moratorium would avoid examination, the Irish equivalent of administration, an option that has finally surfaced on the agenda of the board, whose non-executive members include Lord Lawson, the former Chancellor, Sir John Harvey-Jones, and Garret Fitzgerald, the former Irish premier.

But the option preferred by both the company and bank creditors is still to raise new equity, by continuing last-ditch negotiations with GE Capital Corporation of the US and one other unnamed potential equity investor who may buy a large strategic stake.

GPA's bank creditors, which have been in the driving seat for the past six months of negotiations over the company's debts, have not given up hope that new equity can be injected. The current waiver on GPA's dollars 3.6bn of bank debt expires this Friday. If any further extension is granted it will be for only three weeks. But in the wake of GPA's failure earlier this year to launch a combined rights issue and sale of new shares to a wider group of investors, the two potential strategic investors have set tough terms.

A GPA spokesman denied last night that Tony Ryan, founder and chairman, was under pressure to stand down along with his deputy, Maurice Foley, and other top directors. 'We are not aware of demands for any changes at board level,' he said.

But the conditions imposed by the outside investors with which GPA is now in talks would almost certainly involve them in effect taking control.

If the GPA board accepts the tough terms on offer, it will still have to ask its banks for a bridging loan to allow payments to the bondholders while the details of the restructuring are finalised.

Examination is, at least for the moment, the least likely option because it is opposed by GPA's bank creditors, which want to avoid letting the company go to the wall while any other option remains open.

A source close to the negotiations admitted that 'one or two' bank creditors see examination as appealing, because they believe it would allow a wide-ranging deal with all creditors and give time to devise a new capital structure. But the bank group in charge of the negotiations, led by Citicorp, believes examination would prove complex and difficult, especially in dealing with holders of publicly issued debt in the US.

One bank creditor said: 'We are still hopeful that they will be able to avoid it and that the equity route will be a viable one. The company still has a not insubstantial tangible net worth.' He added: 'The company will seriously and realistically review the options. I would be very surprised if there was precipitate action.'

But two banks, including one of the biggest lenders, are still holding out against the restructuring because they want bigger concessions from bondholders.

If talks with new shareholders break down and a bank bridging loan is not forthcoming, the company would therefore be forced back on the moratorium option, which would cause a big row with bondholders.

Bankers close to GPA admitted that a moratorium would have to be carefully handled to persuade bondholders not to push for the company to be put into examination. To make it work it would have to be on all repayments.

Mr Ryan, whose personal stake in GPA has slumped in value dramatically since the failure of last year's dollars 1bn share offer, conceded at the weekend that GPA was facing 'a tense two weeks'. He is due to fly to New York later in the week to resume negotiations with bankers and potential investors.

Backing Mr Ryan, a bank source said wholesale board changes would be 'dangerous and premature and would lose continuity in negotiations'.

(Photograph omitted)

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