Банкеръ Weekly

Briefs

DEBT-FOR-EQUITY SWAP OFFERED TO THE CREDITORS OF BALKAN

Administrators appointed to help resolve a dispute over debt-laden Balkan Airlines offered a debt-for-equity swap to creditors last Tuesday which may help get the grounded airline back in the air, Reuters informed.
Transformation of debt owed to some creditors into equity has been offered as a possibility for the rehabilitation of the airline but a strategic investor is also needed, administrator Vladimir Petkov told Reuters.
The creditors are to take a decision on the proposed swap. The executive director of insurer Bulstrad, one creditor, said the debt-for-equity scheme could offer Balkan a respite.
At the first meeting of the creditors with a judge held the same day, the administrators published Balkan's balance sheet showing liabilities of 247 million levs ($113 million) versus total assets of 150 million levs.
Balkan's dues include 65 million levs owed to the state and 56 million to Balkan Airlines Holding BV, a Dutch registered company of majority holder, Israeli firm Zeevi Holdings.
The airline also owed some $11 million to Bulstrad, which is controlled by Dutch-based TBI-holding, and about four million levs to Bulgaria's biggest oil refinery LUKoil Neftochim .
In February, the court placed Balkan in receivership after Bulstrad filed a claim seeking Balkan's insolvency. Insolvency claims were also filed by the global airlines body IATA, Sofia Airport and a local firm renting ticket offices to Balkan.
Balkan's loss surged from 9.3 million levs in 1998 to some 20 million levs in 1999 and to 68 million levs last year, administrators said.
Last month, the Transport Ministry withdrew Balkan's air operator certificate. On March 12 the Sofia City Court declared the airline unable to make payments and launched insolvency proceedings against it.The airline has been grounded since February 13 by Zeevi Holdings over a row with the government.
The row flared when Zeevi Holdings demanded $230 million from the government for what it alleged was the government's failure to meet its obligations under a 1999 agreement to sell 75 percent of Balkan to Zeevi. Zeevi said it had asked a Paris-based court to arbitrate on the claim. Bulgaria's Privatization Agency rejected the claim. Zeevi's lawyer Dimitar Danailov said Zeevi had appealed against the court ruling to launch insolvency proceedings against Balkan Airlines. When Zeevi bought the majority stake in the airline for $150,000 it pledged to pay Balkan's debts of $100 million and invest $100 million over five years, recalls Reuters.

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