TAP - what to make of SPDH
All,
Please refer to our unchanged analysis here.
For the time being, Groundforce Portugal will continue to operate and is of course but a tiny part of TAP, certainly in value terms. But the inability to keep the subsidiary solvent is going to give our bonds a dampener tomorrow. TAP will want to secure the continued operation of ground handling in Portugal but may have to take over until its own credit is strong enough to lend any credence to a separate ground handling business in a country with as much single client concentration as Portugal.
What does it mean for TAP’s own restructuring plan?
Nothing most likely. The cash burn at ground handling is relatively modest when compared with TAP itself and the airline have paid for the business so far.
Background:
Since privatisation, TAP only hold 49% of Groundforce Portugal (SPDH). Majority owner is Alfredo Casimiro’s Pasogal. Groundforce has been unable to attract further financing, given it is directly dependent on TAP. TAP, therefore, began to prepay all ground handling services to the airline in November and in March 21 bought the company’s equipment on leaseback. This cash however has also already been used on salaries in April and Groundforce is again acutely insolvent. Attempts to mortgage Mr Casimiro’s shares in Pasogal as well as to work a capital injection have failed and have resulted in a public outbreak between Casimiro and TAP over the weekend - hence today's decision by TAP to ask for the opening of insolvency proceedings over Groundforce. Equally, over the weekend, Mr Casimiro has asked Nomura to sell his stake in Groundforce to Belgian Aviapartner - if still possible.
We continue to hold the SUNs in TAP for 3% of NAV and are expecting a hit tomorrow.
Happy to discuss,
Wolfgang
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E: wfelix@sarria.co.uk
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