October 1, 2020

Air Europa (Globalia) requests an injection of 400 million to the rescue fund for strategic companies




Globalia has asked 400 million euros to the rescue fund for strategic companies to recapitalize after the fall in activity due to the pandemic, business sources have informed Efe today, adding that the request is being analyzed by the State Industrial Participation Society (SEPI).

The operation could help unblock the purchase of Air Europa (of Globalia) by Iberia, agreed last November at 1,000 million euros, an agreement that in those terms and the current context -with the covid crisis in between, “does not make sense” according to the CEO of Iberia, Luis Gallego. This is what he said in the last presentation of quarterly results, on July 31, when he hoped to have a solution “for or against” the merger before the end of this year.

Then Gallego came up against speculation about the possibility that Iberia go to the fund created of 10,000 million euros created by the Government to come to the aid of strategic companies in distress due to the pandemic and which will be managed by SEPI.

That’s when he announced a capital increase of IAG for 2,750 million euros, The amount they hope will be enough to recapitalize the group, which in the first half of the year lost 3,806 million euros due to the stoppage of activity to curb the pandemic.

Precisely tomorrow, Tuesday, the IAG shareholders meeting -group in which Iberia, British Airways, Vueling and Air Lingus are integrated- will approve this capital increase.

Feasibility plan and financial situation

The rescue fund seeks give oxygen to solvent societies but affected by the COVID-19 epidemic, which have the status of strategic for the national or regional productive fabric. Companies that request it must present a viability plan with measurable business forecast objectives and the company’s equity and financial situation.

Public support operations, with a minimum amount of 25 million euros per beneficiary, will be made through participative loans, convertible debt, subscription of shares, social participations or any other capital instrument.

If before five years the beneficiary companies have not reimbursed at least 40% of the aid, they will have orA penalty of 10% and if after 7 years they have not reimbursed everything, the «fine» will be 10% about live participation at that time. For listed companies, the terms are reduced by one year, that is, four years and six years.

The contributions can be granted until June 30, 2021, must be compatible with the regulation of the European internal market and those over 250 million must be notified to the European Commission.

Goodbye to bonuses and dividends

The rules of the Fund prevent beneficiary companies from pursuing aggressive business expansion policies, that they distribute dividends among their shareholders and that their executives receive a “bonus” or any variable remuneration at least until the return of 75% of the aid.

The Government, through SEPI, will have «special rights »on certain strategic decisions to ensure the proper allocation of contributions in charge of the fund, for which it will sign a Temporary Public Financial Support Agreement with the companies as well as a shareholders agreement.

Fusion Be Live Hotels and BlueBay

Besides, the hotel division of the tourism group Globalia, Be Live Hotels, and the BlueBay chain They are studying to merge their businesses, which would add up to about 100 establishments and more than 21,000 rooms, most of them 4 and 5-star categories, in more than 15 countries.

Air Europa obtained a loan of 140 million of a bank syndicate, endorsed by the Official Credit Institute (ICO)

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