Statement from the Ministry of Finance - agreement reached – Malev moves into 95 percent state ownership
Tuesday 2, March 2010
An agreement has been reached on settling the situation of Malév. The parties, with Minister of Finance Péter Oszkó representing the Hungarian State, and representatives of the Russian bank Vnesheconombank, the airline’s former majority stakeholder AirBridge Zrt., Malév Zrt. and the Hungarian State Holding Company (MNV Zrt.) signed the document on Friday evening.
Under the terms of the agreement the Hungarian State acquires a majority, 95% ownership share in Malév Hungarian Airlines. AirBridge retains the remaining 5%.
The change of ownership is managed by a reduction in the equity of Malév and then a capital increase. Vnesheconombank remains one of the largest creditors of the Hungarian airline; this means that its former ownership role is fundamentally changed to that of a creditor.
The ownership transfer and settlement of the position of Malév is the result of a lengthy series of negotiations. In the course of talks the Hungarian State always endeavoured to assert the interests of the country, ensuring the continuation of the operability of the national carrier, and to achieve all this so that the agreement complies with domestic and EU regulatory criteria.
The Hungarian State was involved in the equity increase of Malév in part with cash, and in part with a non-capital contribution through the conversion of earlier debts. Thus the Hungarian State acquired its stake in the airline with a total HUF 25.2 billion.
Earlier, MNV Zrt. initiated a call on the €32 million bank guarantee undertaken by Vnesheconombank. The bank is fulfilling this obligation. Furthermore, as part of the agreement, the bank is swapping Malév loans undertaken under relatively unfavourable conditions for more favourable, lower interest rate loans.
The majority holding of the Hungarian State has opened the way to the creation of financial stability for the operation of the airline. At the same time the ongoing, intensive restructuring programme must be continued partly so that the financial rescue of the company consumes the minimum possible taxpayers’ forints, and partly so that the European Union does not declare the role of the Hungarian State as banned state support.
The goal of the programme being conducted with the involvement of professional industry consultants is to make Malév profitable latest by 2012. In order to achieve this further tough measures can be expected in the operation of the company including, for instance, restructuring of the network, further layoffs, renegotiation of agreements with trade unions, and renegotiation of supplier contracts. Martin Gauss continues as Chief Executive Officer of Malév Hungarian Airlines.
The second privatization of Malév took place in 2007, when AirBridge became the majority shareholder in the 100% state-owned company. Two Hungarian private individuals were the majority owners of AirBridge, and a minority stake was held by Russian businessman Boris Abramovich. The aim of privatization was to provide the continuously loss-making Malév with new market opportunities, improve its equity position and enhance the efficiency of operation of the airline. When Hungary became a member of the European Union the possibility of artificially sustaining the airline with state financial support was closed. The intervening critical global economic crisis hindered the realization of the investment concepts. The crisis has resulted in the bankruptcy of numerous airlines around the world including the collapse of the airline network operated by Boris Abramovich in Russia. The AirBridge shares of Boris Abramovich were transferred to the Russian state-owned Vnesheconombank. In the course of privatization the bank offered financing and guarantees to Boris Abramovich. Once the Russian businessman’s empire became financially unviable the AirBridge shares passed to Vnesheconombank as right of lien.
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