Receiver vetoes bridging loan for Swissair subsidiaries

The loan was rejected because it make the banks favoured creditors in the event that Swissair goes bankrupt Keystone

A court-appointed administrator overseeing the winding up of Swissair Group says he cannot approve a SFr250 million ($152.3 million) bridging loan for the company's airline-related businesses. The decision casts doubt on whether Swissair can continue flying until the end of the month.

The loan, agreed on October 1, was designed to allow Swissair to keep flying until October 28, when the regional subsidiary, Crossair, is due to take over many of the airline’s aircraft and routes.

But without the support of key airline-related units, Swissair may not be able to remain airborne.

The administrator, Karl Wüthrich, said that even taking the widest interpretation of the discretion allowed to him, he was unable to approve the loan because it might be detrimental to the interests of creditors, including employees’ pension funds.

An airline analyst, Sepp Moser, told swissinfo that the loan was rejected because it would give the banks which stumped up the money first claim to any assets, in the event that Swissair Group was declared bankrupt.

“He rejected the proposal because the agreement said that in return for providing the SFr250 million credit, the banks would get hold of the shares of three major Swissair Group companies.

“This would mean that, in the case of Swissair Group going bankrupt – which is still possible – the banks would be privileged because these shares would no longer be able to be distributed among the other creditors [including employees and pension funds].”

The banks – UBS and Credit Suisse – are now examining the possibility of making direct loans to the individual airline-related companies. Wüthrich said he would try to ensure that the companies had enough liquidity to remain operational.

swissinfo with agencies