Reynolds to rescue GPA restructuring with pounds 15m: Government steps in to assist dollars 5.5BN debt refinancing

THE IRISH government has come to the rescue of GPA, the debt-burdened aircraft leasing group, with a pounds 15m capital injection.

The move is calculated to ensure the success of GPA's attempt to restructure its dollars 5.5bn (pounds 3.7bn) debt mountain.

The company's bankers have demanded an injection of fresh equity, by way of a dollars 200m convertible preference issue, from investors before they agree to the refinancing package.

But Aer Lingus, the state-owned airline that has an 8 per cent stake in GPA, is not able to take up its rights because of its own precarious debt position.

An Irish government spokesman confirmed yesterday that the cabinet had agreed in principle to transfer Aer Lingus's rights to new equity in GPA to the Shannon Free Airport Development Company (Sfadco).

But it is understood that the company has still to reach agreement with Sfadco over the terms of the deal.

Aer Lingus is itself seeking funds from the Irish government, as part of a rescue plan proposed by Bernie Cahill, its new chairman.

It is understood that the airline also wishes to dispose of its stake in GPA, as the proposals involve it divesting all non-core activities and holdings. But there are no plans currently to transfer the stake to Sfadco.

The Irish prime minister, Albert Reynolds, said at the weekend that the government would be investing in GPA on the same basis as other shareholders, and that it expected a return 'in time'.

GPA is based in the Shannon Development area, and although the company directly employs only 300, the government is keen to ensure its future because of its status as a prestigious global company headquartered in the region.

The company, the largest aircraft leasing concern in the world, is attempting to restructure dollars 5.5bn worth of debt. Its problems stem from the failure of a planned flotation on international stock markets last summer, and from recession in the airline industry.

A GPA spokesman declined to comment on reports that the Irish government would invest. 'The negotiations with the banks, shareholders and aircraft manufacturers are at a sensitive and confidential stage,' he said.

But it is understood that the company has had discussions with several Irish government departments and state agencies during the restructuring talks.