Банкеръ Weekly



On October 29, 2002, the Sofia City Court is expected to announce an opinion on the Balkan recovery plan proposed by the syndics of the air company. The case will most probably be postponed again, which will lead to a deeper crisis in the national air carrier.Bulgaria's former government sold Balkan to Gad Zeevi for USD150,000. The cabinet that is ruling now keeps the company operating, although it is undergoing insolvency proceedings and is not paying its budget fees.According to the recovery plan, receivables of the creditors will be exchanged for shares in the air company. Although this measure is allowed by the Commercial Law, it cannot be applied to public state receivables. Moreover, even if the recovery plan is approved by the court, nobody can ever guarantee that dissatisfied creditors would not resume the insolvency procedure in a couple of months. Thus the state which became Balkan's biggest shareholder will be cheated one more time, because it will be unable to lay any claims for the company's assets. In this case all of Balkan's assets will be acquired by those who have remained or have become its creditors. One of the people who might profit is Balkan's current owner, Gad Zeevi. However, this time he will be recognised as a creditor waiting to receive back USD50MN.What alternatives are there for October 29? Theoretically, there is only one - to declare Balkan air company insolvent and to initiate the sale of its assets. Logically, the creditors may refuse to support the proposed recovery plan, since the requirements that it imposes have not been met (no changes have been made to the legislation allowing the transformation of public state receivables into capital stakes). This should be determinative for the decisions of both the creditors and the court.In practice, though, the creditors may be forced to accept the plan. Then the court may be asked to delay its decision with the motif that there are candidates to acquire the air company along with all its assets and liabilities.As soon as the goal is achieved - to make the court postpone its sentence on Balkan, there will certainly appear an authoritative foreign consultant who will prepare a new recovery plan... What is the conclusion then? Balkan airlines will remain property of Gad Zeevi and will keep the right to fly under the 87 bilateral aviation agreements. Simply because according to the the privatisation agreement no other Bulgarian company is allowed to acquire these rights within 12 years.Why not give the national flag to the other big carrier, Hemus Air, then? Here comes the other significant moment. Not all European (not to mention the world) air companies are prospering, especially after September 11, 2001. British Airways (through the British aviation direction) was refinanced with more than USD250MN. Alitalia was supported with USD1.2BN through direct raise of the capital by its major shareholder - the state. The former Swissair, currently known as Swiss, is already a brand new company thanks to the fresh CHF3BN support and the fact that the Swiss banks canceled CHF33BN of their bad receivables from the company. Turkey's state-owned airlines, Turk Hava Yolari, receives USD250MN from the government every year. And it carries over 460,000 tons of Turkish production to the USA alone per annum. The governments of all these countries realise that the aviation transport and its infrastructure have great strategic importance for their national economies. That's why the bankruptcy of the Belgian Sabena led to the creation of a new air company. And traffic through the Brussels airport, even after September 11, 2001, is 14 million passengers. While in Bulgaria there are 2.5 million ordinary and charter passengers. Why is Bulgaria building a new airport then? Maybe because of the optimistic forecasts which present Bulgaria as an aviation distribution centre among Europe, the Near and the Far East, and Africa? Obviously, this is the opinion only of the financiers who signed the credits for construction of the new airport. Because, considering the reactions of the government, it has no clear view about the strategic development of aviation in Bulgaria. In fact, the problem is about something more important - the rights to fly under the trade agreements. Until the moment the state and the lobbies come to an agreement, Bulgarian flights may have been given to foreign pilots. Probably Vietnamese or Korean, who are now being trained in their own national air carriers by Bulgarian experts...

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