Transaero issues revised contingency plan

Transaero has handed over to its creditors a revised strategy for overcoming its current financial distress, after Sberbank extended covenant holidays for the debt-laden carrier until October 1. The grace period is granted for the purpose of giving the airline’s creditors time to review its new business model and decide whether to agree to restructuring the part of its debts overdue since May.

The new contingency strategy, designed jointly with the international consultancy McKinsey, was prepared back in December 2014, Transaero said in a statement. The document received government approval and paved way to the allocation of government guarantee against a loan worth 9 bln roubles (US$128 mln at the current exchange rate) provided by VTB (Vneshtorgbank). However, the other creditors were not satisfied with the strategy, and required its further improvement.

Apart from the new strategy, the banks are to study the results of the airline’s operational and financial audit to be performed by Deloitte, which should have its report ready by the end of the month.

Meanwhile, the grace period from some of the other creditors (VTB and Rosneft’s VBRR) expired on August 15. Transaero has since appealed to Deputy Transport Minister Valeriy Okulov, asking him to facilitate an extension of the grace period. Russian media are mulling possible ways of saving the company, which include the allocation of new government securities to encourage the banks involved to restructure the carrier’s debts and accommodate a syndicated loan.

However, the Russian government is yet to be convinced that the troubled airline should receive further aid. Its eventual decision seems to be dependent hevily on the banks’ attitude. “Should the banks and the other creditors confirm the existence of a positive and controllable scenario of overcoming the complex situation, the government will support this scenario,” Deputy Prime Minister Arkady Dvorkovich was heard saying on Aug. 20, as reported by the Russian newswire RIA-Novosti. Dvorkovich also reportedly prompted the banks to provide their solution in the coming days.

Russia’s second largest airline has been in financial distress since the second half of last year. Its 2014 year-end IFRS report mentioned financial obligations worth 160 bln roubles (US$ 231 mln).