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Gov't issues decree on Malév renationalization

A government decree on the renationalization of airline Malév was published on Tuesday.The decree outlines the terms of an agreement reached late Friday between Malév's owners and the Finance Ministry under which the Hungarian state will take over 95% of the airline. The stake held by Malév's previous owner, the Hungarian company Airbridge, will drop to 5%.

The transaction will take place by reducing Malév's capital to HUF 4 million, then raising it by HUF 26.82 billion with the issue of new shares. Hungary's National Asset Management Company (MNV) will subscribe HUF 25.36 billion of the shares, buying HUF 20.7 billion with cash and HUF 4.66 billion through conversion of debt to equity. The debt is from a loan MNV earlier granted Malév to make a down payment on the planned purchase of Malév Ground Handling. The bulk of the HUF 20.7 billion cash will be used to pay off back taxes, and the remainder will be used to finance operations.

The state will take HUF 10 billion from general budget reserves and HUF 7.32 billion from reserves in the budget chapter on state assets for the capital raise in Malév, the decree shows, without indicating where the rest of the money will come from

AirBridge, minority owned by Russia's state-owned Vnesheconombank (VB), will subscribe the new shares through converting EUR 5.38m loans granted to Malév into equity.

Malév will repay €32 million borrowed by AirBridge with a Malév guarantee from VB, but the bank will then lend the airline €32 million with a run of five year and a rate of no more than 500bp over the six-month EURIBOR. The Hungarian state will retain a stake of at least 25% plus one vote in the airline until the loan is repaid.

VB acquired a 49% stake in AirBridge after its owner, Russian airline tycoon Boris Abramovich, defaulted on a loan from the bank.

The decree instructs the Finance Ministry and the National Development and Economy Ministry to draw up a plan for the airline, part of which will involve a commercial bank loan backed by a 95% state guarantee through Eximbank. The decree makes no mention of the size of the loan. (MTI-ECONEWS)