Debt repayment and funds for working capital
Published:
7/3/2000
Loss-making state-owned Lithuanian Airlines, which was slated for privatisation in February of this year, is planning to borrow $7.5m in early July to make up for a significant shortfall in working capital.
The borrowing follows a loan of $1m granted in 1989 by the Lithuanian Savings Bank, but is reported to be the first loan the airlines has taken out to fund working capital. The loan will come from the Industry Bank, a subsidiary of the Lithuanian bank Pereks, and will have a seven year term at a rate of 9.8%, almost 285 bps above the interbank rate despite government guarantees expected to be extended next week.
According to Kestius Auryla, General Director of the airline, the money is necessary to pay off some of the airline's debts of $7.5m, including debts to Eurocontrol, which seized an LAL 737-500 on the ground at London Heathrow earlier this year for ten days due to non-payment of a debt of €500,000. There are also debts to Vilnius Airport, about which the company complained last year of having high charges resulting in a mounting debt, existing bank debt and also leases on the airline's Boeing and Saab fleet.
The airline experienced losses in 1999 after a very difficult year in which sales fell by a third, and is reported to have lost $3.5m in the first quarter of 2000, with a further loss expected for the first half despite a small profit in May, according to the airline's management.
The airline expects to make a profit for the full year, primarily as a result of cutting its costs, with 240 employees due to go out of the 1130 employees by the year end, accompanied by other cost restructuring and the re-organisation of the carrier's routes.
The privatisation process, which is to offer the state's 54% in the airline 49% to a strategic investor and the balance to employees, is reported to be continuing and will be implemented after the restructuring is complete.
Article ID:
1905
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