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Aeroflot eyes €900 mln bond placement for Alitalia stake

Russia's flagship air carrier Aeroflot said Thursday it was considering issuing €800-900 million ($1.075-1.2 billion) in bonds to buy a 39% stake in Italy's struggling national carrier Alitalia SpA from the country's government.

Alitalia, established in 1947, has been fighting a losing battle against low-cost competition and rising fuel prices. Earlier Wednesday the airline announced that a special shareholders' meeting would be convened, after results of its disastrous 2006 financial year came to light, in which the company posted an $843 million loss. In contrast, Aeroflot has posted strong profits recently, with 1Q07 IFRS net profit more than doubling year-on-year to $69.3 million. The carrier expects net profit to hit $220 million in 2007.

Mikhail Poluboyarinov, Aeroflot's deputy director general for finance and planning, said as an alternative means of raising funds to buy the shares, the airline could attract a long-term loan. The Italian Economy and Finance Ministry said earlier in the week that it would be able to sell the whole 49.9% stake in stake in Alitalia held by the government. The seller hopes to raise around €3 billion ($4 billion) from the sale. But Poluboyarinov said: "For Aeroflot's goals, buying a 49% stake in Alitalia is not necessary... It would be sensible for the Italian government to have a presence on the board to correctly position the company on the market." Aeroflot's board of directors is expected to make a decision on the purchase of the stake by June 15. (