RO FinMin could charge 2% risk fee to guarantee rescue loan for private airline Blue Air

Under a decision subject to public debate, Romania's Finance Ministry wants to guarantee a EUR 62 million (RON 300 mln), 6-year loan to private airline Blue Air in exchange for a risk fee of 2% per year.

According to Eximbank's analysis, the chances are high that the Government will end by paying the EUR 62 mln loan from the public budget.

The company has a negative net worth, according to the note attached to the draft Government decision.

Furthermore, the note points to the company's high operational risk, as Blue Air grounds its forecast on quick recovery resumption of international flights.

The recovery plan also includes a capital injection of EUR 50 mln, out of which EUR 20 mln in 2021 and EUR 30 mln in 2022. State-controlled bank Eximbank would thus charge a risk-free interest rate of ROBOR+4pp.

The creditworthiness of Blue Air, assessed by EximBank, based on the company's financial results at the end of 2019 (before the crisis), is particularly weak, underpinned by the D category, on an A-E scale.

"There is significant uncertainty about the company's ability to continue operating and a high risk of not meeting its financial obligations. The company currently meets the legal requirements to be included in the category of companies in difficulty, given that more than half of the subscribed share capital has disappeared due to the accumulated losses. The company will be unable to continue operating if it doesn't benefit from financial aid," according to the evaluation drafted by EximBank and included by the Government in the note attached to the decision of guaranteeing the EUR 62 mn loan to the airline.

EximBank also notes that under current circumstances, the law required Blue Air to hold a shareholder meeting and decide whether to increase the capital or liquidate the business.

The Finance Ministry argues that the loan planned for Blue Air would cover the company's losses during the coronavirus crisis, and nothing more. It also mentions that the European Commission approved the state aid.

(Photo: Nikolay Bychkov/ Dreamstime)