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Reports: Change in Management Condition for Adria Airways Rescue

Ljubljana, 05 January (STA) - Slovenian flag carrier Adria Airways is in talks with its creditors on a programme of operational and financial restructuring, dailies Dnevnik and Finance report on Wednesday, adding that some of the banks have made their participation conditional upon the replacement of the management.

The news come after Maks Tajnikar, the president of the board of directors of the state-owned airliner, said at the end of 2010 that Adria was embarking on voluntary debt restructuring aimed at making Adria fit enough to be interesting for a foreign investor.

According to the papers, the restructuring programme envisages a capital injection with a partial conversion of claims into capital, reduction of debt, extension of loans by seven years and cutting of labour costs.

The employees agreed at the end of December to a 20% pay cut, but the restructuring programme envisages additional cuts.

Adria expects from the creditors, banks in particular, to convert about a third of their claims into capital, which means that the creditors would become majority owners of the flag carrier.

Banks are ready to participate in such a capital increase, but they want to get guarantees that Adria would be sold in the next phase, according to Dnevnik.

Finance meanwhile write that some of the creditors do not want to discuss rescuing Adria Airways with the government as long as the company is headed by the current board of directors.

According to Dnevnik, Adria's debt stands at EUR 130m, of which EUR 80m is outstanding loans from banks. Other companies with significant claims to Adria are airport operator Aerodrom Ljubljana and fuel retailer Petrol.

Finance adds that the state-run PDP restructuring fund, which holds a 87% stake in Adria, intends to break the deadlock by calling a meeting of shareholders, which is likely to bring changes in the management.

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