From today's FT :
Banks tell air traffic control group to seek funds
Financial Times, October 23rd, 2001
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National Air Traffic Services is under pressure from its bankers to request an emergency injection of funds from government, just three months after its controversial part-privatisation.
The Financial Times has learnt that bankers to Nats are encouraging it to seek help from Stephen Byers, transport secretary, to help it through the post-September 11 crisis in the world airline industry.
Ministers say they are braced for a request for a cash injection from the company, which runs Britain's air traffic control system, although the extent of any help could be limited by EU state aid rules.
Yesterday, a senior ministerial insider indicated that an approach from Nats was expected within weeks. "They are working it through, trying to do some estimates. When they've done that I think they'll probably come to us," he said.
Nats, which relies on fees from airlines flying through UK airspace, believes it may need extra support to safeguard its long-term capital spending programme.
But any request for emergency money is certain to draw comparisons with the recent crisis at Railtrack, which became dependent on government support.
It will also call into question the viability and risk associated with public-private partnerships (PPPs), of which the London Underground is the highest profile.
Labour MPs, many of whom opposed the PPP sale of Nats, are likely to be furious that the private sector is already considering seeking support from the taxpayer. Martin Salter, the Labour MP for Reading West who opposed the partial privatisation of Nats, said: "It would be appalling if the taxpayer was asked to bail out a flawed part-privatisation that should never have happened in the first place."
A consortium of seven British airlines, including British Airways and Virgin Atlantic, owns 46 per cent of Nats. The government owns 49 per cent with employees owning the remaining 5 per cent.
The company has cut costs, slashing 20 per cent of support staff and management, and delayed plans for an air traffic control centre at Prestwick.
But Nats' bankers want extra financing from the government to strengthen the balance sheet either in the form of equity, or in the form of a long-term subordinated loan, which would have the character of equity, but which would not increase the government's 49 per cent stake.
The debt, provided at the end of July by a consortium of four lead banks, Abbey National, Barclays Capital, Halifax and Bank of America, provided Pounds 700m of acquisition finance and a Pounds 760m capital spending facility to help fund Nats' 10-year, Pounds 1bn capital expenditure programme.
The uncertainty over Nats' future business plan has forced the four lead banks to postpone their syndication of around Pounds 1bn of the Pounds 1.46bn Nats financing until the first quarter of 2002.
Mr Byers told the Financial Times: "I think we should wait to see how they intend to deal with the difficulties that the downturn in traffic has caused. We know they have got problems but one could argue they should have factored that into their business plan."
I especially like the last sentence from Mr Byers
TACCY
[ 23 October 2001: Message edited by: TACAN ]