Troubled Swiss has received a major boost with the closing of a SFr325 million ($429 million) credit agreement that has taken over a year to negotiate.
Some SFr180 million of the credit facility will be available immediately, with the remainder being used to provide additional equity on 31 aircraft, giving Swiss room for manoeuvre in arranging its finances. As the financial obligations on these aircraft are met over the next two years, the amount of credit available to Swiss will increase to SFr290 in June 2005 and the full SFr325 in 2006.
The syndicate providing the facility includes Halifax Bank of Scotland (HBOS), Barclays Capital, Credit Suisse, UBS and the Zurich Cantonal Bank. UBS and Credit Suisse are both shareholders in Swiss. The banks were advised by law firm Denton Wilde Sapte, whose partner of aircraft finance, Nick Chandler, comments: "This is a highly complex deal, not only due to the size of the facility, but also due to the number of different finance agreements already in place, which the facility had to consider. It's not every deal when you have to take 31 mortgages over 31 aircraft."
At the same time, Swiss secured a €68 million ($88 million) letter of credit from Barclays Capital and HBOS that will provide credit support for aircraft leases, freeing aircraft collateral that will be pledged under the SFr325 million facility.
The fact that negotiations had taken over a year led some analysts to question whether Swiss would ever obtain the credit. "With our enhanced liquidity base, we will now be able to take the steps required to further strengthen our competitive position," says chief executive, Christoph Frantz.
Meanwhile, the Swiss stock exchange asked the carrier to clarify comments made by Frantz that the carrier was going to make labour savings of SFr300-400 million this year. The carrier said in a statement that this should not be seen as an indication of the performance of the business. "Further measures are required to achieve a turnaround".
COLIN BAKER LONDON
Source: Airline Business