Bloomberg News

Hungary’s Malev Cedes Spending Control to Bankruptcy Trustee

February 03, 2012

(Updates with trustee comment starting in fifth paragraph.)

Feb. 2 (Bloomberg) -- Hungarian national airline Malev Zrt., weighed down by debts of 60 billion forint ($270 million), no longer has control over its own spending plans after a court appointed a bankruptcy trustee to oversee the company.

Outgoing payments must be approved by the state-owned, non- profit liquidator, Hungary’s Development Ministry said. The court also granted a moratorium stopping business partners from suspending Malev’s contracts and extending its aviation permits.

“The bankruptcy trustee will only approve payments that are needed for the continued and orderly operation of the airline,” the ministry said in a statement, adding that the moratorium provides “a security similar to bankruptcy protection.”

Malev has until tomorrow to submit a survival plan to the trustee or face being grounded. European nations are becoming reluctant to back carriers as the debt crisis forces cost cuts in other parts of the economy, with Spanair SA ceasing flights Jan. 27 after the Catalonia regional government halted funds.

Balazs Fabian, who heads the trustee company, said at a press briefing in Budapest that the information to be presented tomorrow will indicate how long Malev can go on operating.

“We’ll know from the liquidity plan,” he said at the briefing, which was attended by Malev Chairman Janos Berenyi.

Hainan Interest

China’s HNA Group, parent of Hainan Airlines Co., held talks with Malev in 2011 and is “willing to restart negotiations on a possible bid,” it said today in an e-mailed response to questions, adding that there are no communications at present.

HNA, which also controls Hong Kong Airlines and has shipping, tourism and retail assets, said a deal would depend on Malev and Hungary accepting terms of an offer, as well as approval from China.

Malev aims to sustain liquidity and continue flying through an orderly bankruptcy that would allow it to be restructured or a successor established, Chairman Janos Berenyi said on Jan. 31. The executive said there are potential buyers for the carrier and that a bid from HNA is “not impossible.”

The Hungarian government declared Malev a “strategically important company” on Jan. 30, shielding it from creditors.

--With assistance from Zoltan Simon in Budapest and Jasmine Wang in Hong Kong. Editors: Chris Jasper, Chad Thomas.

To contact the reporter on this story: Edith Balazs at ebalazs1@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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