The government has altered the agreement for the sale of state airline TAP including a clause that, if triggered, forces the taxpayer again to underwrite losses if the airline continues to be run at a loss.
The banks exposed to TAP are BCP, Deutsche Bank, BIC, CGD and BPI, which petitioned for a new lending guarantee clause. The government agreed in order to unblock negotiations.
In effect, if TAP loses money, its lenders get a state backed guarantee that they will be repaid with taxpayer funds – not exactly the original plan which was to free the taxpayer from the billion plus in TAP borrowings.
The state already has the right to reverse the sale under certain circumstances, but with the banks’ lending underwitten by the taxpayer, the much sought after control over TAP seems increasingly tied up in red tape and thus, unattractive.
The Council of Ministers approved this key alteration to the deal on October 22nd which may change the attitudes of Gateway’s owners, Humberto Pedrosa and David Neeleman who seen that the banks have the upper hand in any further loss making situation while Gatweway strives to rebuild the shattered business.
This explains the recent announcement that TAP’s accounts are to be audited monthly from now on; not as a management tool to ensure a firm grasp on the business, but as a way for the banks to monitor the figures to see when they can trigger the killer clause.
The banks are getting a guaranteed ride with double insurance provided by the capital tied up in TAP and, if this does not cover their loan in the event of a default, the good old taxpayer who will pick up the tab with Parpública guaranteeing the loans.
TAP planned to extend the pay back periods for its various borrowings but the banks realised that, under the untested Gateway, taxpayer backing for their largesse would evaporate. The result is 100% in favour of the banks who, if this were a normal business, would have pulled the plug years ago.
