TAP will issue bonds worth 400 million euros later this year, the company announced. According to clarification provided to the Observer by an official source from the Ministry of Finance, “this operation will allow TAP meet one of the objectives of your restructuring plan a year ahead of schedule, already in 2024, when the initial expectation would only occur in 2025.”
The same source highlights that the company “is ready to return to the markets and refinance, to face a payment of an obligation due at the beginning of December.And he explains that to complete the debt issuance it was necessary to make an “adjustment to the company’s equity structure, without compromising its solidity or entailing any additional liability for the State.”
This adjustment involves a reduction in TAP SA’s share capital to absorb losses, as well as the decision to execute the last tranche of support for the company of 343 million euros in the form of accessory payments, replacing the last tranche of the capital increase. of the company. TAP approved in 2022. In the statement to investors, TAP states that the operation was approved “with the objective of allowing access to capital markets.”
The issuance of debt in the private sector was one of the conditions imposed by the European Commission when it approved TAP’s restructuring plan at the end of 2021. But the planned operation did not take place, partly due to adverse market conditions with higher interest rates, but also because the company’s rapid recovery allowed it achieve a comfortable level of liquidity.
This issue was prepared by TAP for 2023. The financial manager indicated that TAP needed to go to market because it had outstanding debt, part of which has already been paid. Bonds worth 200 million euros placed in retail in 2019 already matured last year. Another bond issue of 375 million euros will mature in December which, given the value in question, will be the one that TAP now intends to refinance. This debt is placed with international investors and has a fixed annual interest rate of 5.625%.
TAP will not go to the market until 2023 to refinance private debt. This year there is still public aid of 990 million
The information about these operations was provided by TAP in a statement released this Tuesday that describes the deliberation of the shareholder State. Before the bond issue, the sole shareholder, the General Directorate of the Treasury, carried out several deliberations to reinforce the accounting soundness of the balance sheet, which resulted in a reduction of TAP SA’s capital from 980 million euros to 313.6 million euros. nominal reduction in the value of the shares.
In this way, losses of 323 million euros will be absorbed from TAP’s balance sheet, but also with the “objective of extinguishing the obligation of the Portuguese Republic to pay the last tranche of the share capital subscribed by it on December 27, 2022.” . In exchange, the State assumes the obligation to pay the same amount provided for in the capital increase approved by the European Commission within the framework of State aid to TAP. This obligation will be carried out through “additional payments subject to the regime of complementary capital contributions, “in the scope of the previously planned capital reinforcement operation and without resulting in any additional responsibility for the State.”
Another 343 million from the State from the capital increase decided in 2022 have already entered TAP
For the issuance of bonds or other securities, a maximum limit of 400 million euros was established for the board of directors to deliberate this year.
The statement does not mention anything about the payment of the bond issue subscribed by the Brazilian airline Azul y Parpública that matures in 2026. This debt is on the balance sheet of TAP SGPS, the company that retained the airline’s problematic assets and has been excluded of recapitalization operations.
Source: Observadora
