Four and a half thousand employees of German charter carrier LTU can breathe easier today after the company agreed a rescue package with its banks.
Germany's second largest carrier in financial trouble
The deal comes one day after the EU Commission approved state guarantees worth 120 million euro.
LTU is Germany's second largest charter carrier. It almost folded when former majority shareholder Swissair was dragged down by the crisis that hit the airline industry following the September 11 attacks.
However, the rescue plan hit unexpected turbulence regarding the role of the banks. The funds provided by the EU were to be released over the next six months by its creditors.
Three banks are involved namely Stadt-Sparkasse Düsseldorf, WestLB and Dresdner Bank. These three banks stated that they wanted to hold further meetings on their various roles in the plan. It is expected that the banks initially demanded increased security before releasing the funds.
Stadt-Sparkasse Düsseldorf also said that it was not prepared to act as trustee for the LTU shares formerly held by Swissair. It had acquired the 49.9 percent stake for a nominal 1 euro.
A Stadt-Sparkasse Düsseldorf spokesperson is reported as saying that there could be a conflict of interests if the bank acts as a trustee on the one hand and a provider of funds on the other. However, this will be resolved when the new, as yet unannounced partner is on-board as trustee.
The North Rhine-Westphalian parliament is also unhappy with the federal state’s role in the plan. The Budget and Finance Committee initially rejected Finance Minister Peer Steinbrück's declaration as guarantor and called for renegotiations.
Unconfirmed reports from committee insiders also suggested that some members of parliament were not too pleased with the responsibility placed on the state in assuming all credit risks.