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Malév restructuring to cost HUF 50 billion

It could cost the government at least HUF 50 billion (€178.66 million) to settle the position of 95%-state-owned Hungarian national carrier Malév and implement its recently approved three-year strategy, the daily Népszabadság said on Tuesday, citing unnamed sources who were present at a recent AGM.

The paper said similar conclusions can be drawn from the auditor Deloitte's report enclosed with the company's annual report.

The annual report for 2009 shows Malév had consolidated losses of HUF 26.8 billion at the end of last year, and it had negative equity of HUF 51.3 billion, and a capital raise of HUF 25.2 billion as part of nationalization earlier this year only improved but did not resolved the problem, reducing negative equity to HUF 26 billion.

The auditor pointed out the owner's financial support is necessary to financing operations. Malév will need around HUF 6 billion by the end of the summer alone to keep the claims of creditors at a manageable level, not including the HUF 2 billion it received from the owner in recent weeks, Népszabadság reported.

The auditor also noted that a HUF 8.2 billion loan from an owner is rather a short than a long-term liability as it can be called any time by the lender. Népszabadság said this item was the recently revealed €32 million counter-guarantee Malév had undertaken for its previous owner.

A three-year strategy approved by a May 28 AGM targets operating profit of €25 million by 2012. It aims to cut costs by €48.8 million over the three years, boosting efficiency and raising revenue.

The state of Hungary acquired the 95% stake in Malév in March 2010 through a HUF 25.2 billion capital raise, including cash and the conversion of debt. Former majority owner AirBridge, in which Russian airline tycoon Boris Abramovich controlled a significant stake, was squeezed out through a reduction of equity followed by a capital raise. AirBridge retained a 5% stake in the airline. (MTI-ECONEWS)