TAP Siza Vieira says he has no details on capital reduction

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Manuel de Almeida / Lusa

The Minister of State, Economy and Digital Transition, Pedro Siza Vieira

The economy minister said this Wednesday he did not have details about the capital reduction operation at TAP and subsequent total control of the state this year, but reiterated the airline’s strategic importance for the Portuguese economy.

“Like at Caixa Geral de Depósitos, we had to demonstrate to the European Commission that the recapitalization and restructuring plan ensured future viability, we also have to do with TAP and that is what we are going to do. If this in particular will determine a need to make a capital reduction to absorb losses and then a new capital increase, whether it will be made entirely by the public sector or will also be monitored, is a detail that I do not have at this point”, said the Minister of State, Economy and Digital Transition, Pedro Siza Vieira.

The ruler participated in the webinar “Reactivating Tourism – Building the Future”, organized by the Hotel Association of Portugal (AHP), when asked if it confirmed the news advanced this Wednesday by Público, that the State will become TAP’s sole shareholder this year and that the European Commission says that there will be a reduction in the capital of the airline, to clean up losses, then assuming 100% of the state of the group, in which it will invest 2726 million euros in capital until 2022.

“I don’t confirm”, replied Siza Vieira. “What I can say is the following: the analysis we carried out here at the Ministry of Economy is that TAP is truly a strategic company for the country,” he added.

According to the news put forward by Público, the operation will take place later this year and will involve private shareholders, including businessman Humberto Pedrosa and small investors and workers.

The plan also involves the total investment of 2,726 million euros of public money in TAP’s capital.

Lusa also contacted the Ministry of Infrastructure and Housing, but has not received a response so far.

The information is contained in a document from the European Commission, dated July 16 and now published on the community executive’s website, after the confidential information has been removed.

The document states that “in order to ensure the proper sharing of the burden by the shareholders of the beneficiary, the total value of the share capital will be reduced to […] the accounts of TAP SGPS. Prior to this reduction, all non-equity shareholders (namely the supplementary payments by Parpública and HPGB) will be converted into capital in order to allow for their total reduction for the purpose of absorbing losses”.

“Following the capital reduction and loss absorption referred to above, the Portuguese State, through DGTF, as the sole shareholder of TAP SGPS at this stage, will subscribe a capital increase of approximately […] at TAP SGPS. Additionally, TAP Air Portugal will also be subject to a capital reduction for the purpose of absorbing losses. Only after this operation will the first restructuring measures in the State sector be carried out, the conversion into capital of the existing 1,200 million euros rescue loan”, the document also reads.

Regarding the restructuring plan of the Portuguese carrier, the Minister of Economy said that they were evaluated other alternatives to help the company, after having got into financial difficulties, aggravated by the covid-19 pandemic, such as insolvency, followed by the creation of another company.

“All [as alternativas] they are difficult to consider, but the attempt to restructure TAP and keep it is the one that best assured us of maintaining this strategic value at a lower cost”, he said.

“The Member States of the European Union cannot put money into companies that do not have a prospect of long term viability. Public money should not serve to keep an unviable company in business, competing with other companies that are even healthier, but that do not have access to public resources and, therefore, what we need to demonstrate is that TAP, after being restructured , remains a viable company”, stressed Pedro Siza Vieira.