Taesa, Mexico's third airline, has dodged bankruptcy, received an injection of new capital from abroad, and is near a restructuring accord with its creditors that should, once completed, attract more offshore investors.

Judging from recent reactions, though, some local creditors and Mexico's competition commission will remain nervous until the deal is finally closed. A Singapore-based consortium, International Air Finance (IAF), rode to the rescue in mid-May with a US$10 million injection that calmed nerves and bought Taesa time to work out a final restructuring plan. IAF is made up of international investors, including parties from Canada and Hong Kong, explains Capt Alberto Abed, Taesa's chairman and chief executive.

In exchange for the capital, the group will receive about 15 per cent of Taesa's shares; the precise amount will depend on final negotiations with the carrier's creditors. Abed says more investment could be forthcoming. 'Now that the investors are involved in the company and can see how we perform there is the possibility they will put in more money.'

Talks are also underway with another group of foreign investors. 'In the next four to five months we will see new investment in the company as soon as we can tie together this restructuring programme,' predicts Abed.

Management is still hammering out the details of the plan and negotiations with Taesa's creditors, mainly a group of Mexican banks, are nearing the final stage. The sticking point is what percentage of Taesa's equity the banks will take in exchange for capitalising two-thirds of its US$330 million debt. The discussions are complicated by the fact that Banco Union, the largest creditor with US$100 million outstanding, is under government supervision itself. This means both the federal treasury department, as financial watchdog, and the communications and transportation ministry, as airline regulator, are parties to the talks.

Abed says the banks will end up with no more than 49 per cent of Taesa's equity. The current owners (consisting of Abed and his family) and the new investors will hold the other 51 per cent. Mexico limits foreign ownership in its airlines to 25 per cent.

The $10 million deposit from IAF helped convince Bancomer, one of the smaller bank creditors, to withdraw its petition for Taesa's bankruptcy. 'Nothing is pending on that now,' says Abed. The petition from Bancomer, which is owed only $4 million, and the general reactions to the move, underscore how nervous Mexicans are at the prospect of losing their third largest airline. First the petition set off a chain reaction among creditors. Then Fernando Sanchez Ugarte, head of Mexico's competition commission, warned that any liquidation of Taesa would prompt the commission to reconsider its decision allowing common ownership of Aéromexico and Mexicana. The commission requires Mexico's first and second largest airlines to maintain separate operations and identities, at least within Mexico, even though both are owned by Cintra. The prospect that Taesa might disappear as a competitor raises concerns for the commission.

Taesa has been struggling to regain profitability after the peso crisis. Its net result for 1996 will be negative, but Abed maintains the operation is fundamentally sound, pointing to a 1996 operating profit of nearly $20 million. He predicts this year operations will produce an operating surplus of some $32 million.'


Source: Airline Business