The Government has approved the decision regarding the granting of the state guarantee related to the 300 million RON loan provided by EximBank for the low-cost airline Blue Air.
For Blue Air Aviation – S.A., the Ministry of Public Finance was authorized to guarantee, on behalf of the state, 100% of one or more loans, as well as the related interest and commissions, up to the limit of 300,775,000 RON, for a period of up to 6 years, as state aid and rescue aid. The contracting of the loan(s) is to take place by October 31, 2020, and the disbursement of funds to the company will be completed by January 31, 2021.
The European Commission authorized the measure to grant aid in the form of a state guarantee covering 100% of the 300,775,000 RON loan, as well as the related interest and commissions, of which:
a) the RON equivalent of 28.29 million EUR, for a period of 6 years, to compensate for economic losses suffered as a result of the COVID-19 pandemic caused directly between March and June 2020, and
b) the RON equivalent of 33.84 million EUR, for a period of 6 months, will be provided as rescue aid to partially cover the company’s urgent liquidity needs between September 2020 and February 2021.
To this end, until the full repayment of the loan exceeding 300 million RON, guaranteed by the Romanian state, the Government will have two representatives—with veto rights—on the board of directors of the low-cost airline Blue Air. The company will not be able to grant dividends or return loans to shareholders, nor will it be able to alienate aircraft until the same deadline.
Now, the Government has approved the model of the guarantee convention and the model of the guarantee letter, which includes the general clauses for the state guarantee of the loan, as well as the financial terms of the state-guaranteed loan.
The presented financial model reveals the achievement of a positive cumulative cash flow, but it is based on a series of optimistic hypotheses: returning to activity levels prior to the start of the pandemic, adopting a new business strategy and restructuring expenses, under the conditions that the company will continue its activity for an indefinite period (going concern), as well as the successful implementation of the concordat plan, which in turn has as main premises the obtaining of the state-guaranteed loan and the realization of the additional capital infusion.
Failure to achieve the estimated capital infusions will unfavorably impact the cash flow/the capacity to ensure the flows necessary for the conduct of the activity.
The company’s cash flow is considered optimistic, according to Eximbank, given the forecasts of future receipts, considering that for 2021 these are estimated at 80% of the 2019 achievements.
In the event that the EC issues a decision to recover the rescue state aid, the Ministry of Public Finance will implement this decision in accordance with European and national legislation in the field of state aid.
Frequently Asked Questions
What is the total value of the state-guaranteed loan for Blue Air?The total value of the state-guaranteed loan is 300,775,000 RON, granted through EximBank for a period of up to 6 years.
What restrictions does Blue Air face during the loan period?Until full repayment, Blue Air cannot grant dividends, return loans to shareholders, or alienate aircraft.
What role does the Government have in Blue Air’s management following this aid?The Government will have two representatives with veto rights on Blue Air’s board of directors until the full repayment of the guaranteed amounts.