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UPDATE 2-Air France refinancing step expected in days, minister says

(Adds detail, background)

PARIS, March 29 (Reuters) - Air France-KLM moved closer to a state-backed recapitalisation on Monday, as the French government said it was nearing a deal with Brussels on the terms of its contribution.

The airline group, which received a 10.4 billion-euro ($12.3 billion) bailout to weather the coronavirus crisis last year, plans to convert 4 billion euros in French and Dutch government loans into hybrid “quasi-equity”.

But conversion of the 3 billion euro government loan for Air France has been delayed by wrangling over European Union demands that the airline give up take-off and landing slots at Paris-Orly Airport to address competition concerns over the aid.

“We are nearing a deal,” Finance Minister Bruno Le Maire said on France Info radio, predicting a final agreement within “a matter of days”.

The European Commission “cannot prejudge the timing or outcome” of the talks, a Brussels-based spokeswoman said, declining to comment on the details.

EU officials had initially demanded a similar number of slots to the 24 ceded by Germany’s Lufthansa in Frankfurt and Munich in return for its government-backed capital hike, sources close to the talks have said.

That position drew protestations from Air France, its unions and the government.

The latest progress came after Brussels agreed to a smaller number of Air France slot concessions, newspaper Le Monde and other French media have reported.

France and the Netherlands each own close to 14% of Air France-KLM. Dutch officials have held separate EU talks over converting KLM’s 1 billion-euro government loan into hybrid debt in return for slot concessions at Amsterdam-Schiphol.

Separately, Air France-KLM is expected to raise new share capital once market conditions allow.

The group ended 2020 with 5.42 billion euros of negative shareholder equity after posting an annual net loss of 7.1 billion euros. ($1 = 0.8484 euros) (Reporting by Laurence Frost and Dominique Vidalon; Additional reporting by Foo Yun Chee in Brussels and Toby Sterling in Amsterdam; Editing by Alex Richardson and Louise Heavens)

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