A US pension company is threatening to force GPA into bankruptcy, just as the troubled aircraft lessor faces a realistic chance of financial stability for the first time in four years.
Shannon-based GPA, which reported losses of $26 million to 31 March 1995, wants to launch a bond issue to refinance its secured and unsecured debt obligations of $1.6 billion, that fall due from the end of 1996 and extend into the next millennium.
At presstime, GPA was facing two possible futures: the successful launch of a bond issue in Luxembourg, secured against 230 aircraft, which would raise about $2 billion, or filing for examination, the Irish equivalent of bankruptcy. Which path it took depended on the Pennsylvanian pension fund, Public School Employees' Retirement System (PSERS), which holds $30 million worth of GPA's secured notes out of a total $129 million and $100 million in preference shares.
The proposed bond issue, through a US special purpose company, would repay GPA's bank facilities and the secured note holders with 50 per cent in cash, and the other half in investment grade securities in the new vehicle. The preference shares, which PSERS bought prior to the failure of the initial public offering in 1992 and are now worthless, and are not included.
One banker close to GPA suggests PSERS is blocking the bond issue to squeeze GPA into giving some value to those preference shares. PSERS' secured debt would retain its value if GPA called in the examiners, while the preference shares would remain worthless, he says. PSERS is gambling that GPA will crack and give it some value for the preference shares now, rather than risk examination.
But the remaining 140 secured creditors would have to agree to any such transaction. With exposure to the aviation market elsewhere most creditors do not want to see GPA enter examination, but allowing PSERS value for preference shares could open the flood gates for others.
GPA must go ahead with the bond issue, filed with the US Securities and Exchange Commission in December, within the 135-day limit or face a potentially fatal delay. If the $2 billion issue is not completed before GPA's 31 March year-end, the directors are unlikely to sign off the full-year accounts because of the lessor's inability to guarantee its debt obligations over the ensuing 18 months. This would prevent a new bond issue because 1995/96 financials would then not be available for a further SEC filing, explains the banker.
The proposed issue assumes aircraft will not be sold when the bonds expire, but will be re-leased, with the notes themselves being reissued. GPA will be left with 124 aircraft in its portfolio if the bond issue goes ahead. The lessor refused all comment.
Sara Guild
Source: Airline Business
