O'Brien's Alitalia leases deal could end 'at any time'
The administrator of troubled airline Alitalia, which is the principal client of Denis O'Brien's aircraft leasing firm Aergo Capital, has the option to cancel the carrier's leases with the company at any time, according to notes to accounts just filed for the firm.
About 51pc of Aergo Capital's turnover is derived from lease arrangements with Alitalia, which was placed in administration in August.
While Aergo's dependence on Alitalia has reduced year-on-year, it still accounted for 43pc of its fleet by carrying value at the end of 2007.
Notes to the accounts state that one of Aergo Capital's subsidiaries, Aergo Leasing (ALL), leases all its aircraft to Alitalia, while another subsidiary, Aergo Omega Leasing (AOLL) leases most of its aircraft to the embattled Italian carrier.
The accounts say that under the terms of the extraordinary administration that Alitalia was placed under in August, the administrator "can continue to honour leases, or reject them".
ALL and AOLL have limited recourse debt, and the terms of that debt "are such that any default on their part may result in the transfer of shares in and control of the two entities to their financiers," note the accounts.
Aergo directors claim they believe they will retain control of ALL and AOLL for the "foreseeable future", but are "uncertain" as to the outcome of these future matters.
Accounts for Aergo Capital show that profits at the firm almost doubled to $16.7m (€12.96m) last year as turnover jumped about 60pc to $49m.
Aergo Leasing posted reported turnover of almost $15m in 2007 and a pre-tax profit of €1.8m.
Last week, Alitalia's administrator, Augusto Fantozzi, accepted a revised €1.05bn bid for the airline's main flight business from Italian investor group CAI, which includes some of the country's leading businessmen.
That deal is due to close on Sunday and will include a cash payment of €427m, while CAI will also assume €625m in debt, including financing for aircraft.
CAI plans to sell a minority stake in the business to a foreign operator within the next few weeks.
Mr Fantozzi needs to sell or liquidate other unprofitable Alitalia assets and to repay creditors and a €300m state loan that the European Commission has ruled to be illegal.
CAI valued Alitalia's traffic slots at some of Europe's busiest airports, including London Heathrow, at €550m.
The new Alitalia will return half of the proceeds from the sale of slots in the next three years to the administrator.
Aergo Capital had outstanding bank loans totalling $166m at the end of December 2007. Its aircraft had a net book value of $10.7m at the end of 2007.
- John Mulligan
