UPDATE 2 - Govt declares Malev 'strategic company' in decree

The government on Monday declared national carrier Malev a "business of prime strategic significance".

The government made the declaration in a decree dated January 30 as mandated by a paragraph in the Act on Bankruptcy and Liquidation Procedures. The decree came into force at 7am on Monday.

In the Act on Bankruptcy and Liquidation Procedures, a government declaration of a company’s "strategic significance" prevents any creditor of the company from initiating a bankruptcy procedure against it.

The decree cites paragraphs in the act which authorise the government to make the declaration of troubled companies at which the settlement of debts, agreement with creditors or reorganisation is in the national economic interest.

The declaration may be made of companies of "national significance" whose losses cannot be eliminated "in the foreseeable future because of a shortage of assets" and in which neither the owners nor the state may offer support, but whose possible sale as a whole entity is in the public interest in light of its continued operation thereafter.

The declaration allows the companies to be wound up without a legal successor in an accelerated, transparent procedure.

In either case the company in charge of the procedure must be a nonprofit company wholly owned by the state. The

company in charge may issue invitations for the sale rather than calling a public tender but must protect the interest of creditors as with any other company.

The declaration could be a useful tool for a reorganisation of the airline, the communications department of the National Development Ministry said, answering a question by MTI.

The ministry said the measure, which it called a "necessary legal technicality", was in line with its earlier announced strategy to keep a Budapest-based airline operating.