EADS shareholders reached agreement last night on a €10 billion financing package for the Airbus A350 airliner, the European aircraft manufacturer's answer to Boeing's 787 Dreamliner.
The deal paves the way for the EADS board to approve the launch of the long-range, mid-size aircraft at a meeting scheduled for today.
A board meeting scheduled for last Friday was postponed at the last minute amid disagreements over financing between the group's core Franco-German shareholders: the French government, Lagardere and DaimlerChrsyler. The French government, which holds 15 per cent of EADS, was last night understood to have agreed to provide a state guarantee for part of the financing plan.
According to people close to the discussions, some €6 billion of the A350's development cost will be funded by EADS internally and a further €4 billion through financing backed by state guarantees from the four countries supporting Airbus: France, the UK, Germany and Spain. This could be a combination of bond issue, reimbursable loans or other measures.
The structure of the €4 billion component of the funding has yet to be decided and was likely to remain unresolved for some time. EADS and its shareholders are keen to avoid inflaming a trade dispute between the US and European Union over state aid to Airbus. Boeing, the European aircraft maker's US rival, has threatened strong action if the company relies on so-called "launch aid" from the four governments for the A350 project. "The guarantee package will be adapted to the Boeing challenge," said one insider, adding that the company did not need to raise the additional financing until 2010.
EADS is expected initially to fund the A350 from cash reserves, estimated by one insider at € 4 billion, and € 2 billion in cost savings due to be achieved by 2010 from a recently announced restructuring programme.
However, this will constrain overall group resources. EADS is understood to be considering a state-guaranteed, hybrid bond issue to increase financial flexibility. Hybrid securities blend characteristics of debt and equity, cutting the cost of capital for issuers.
They also have the advantage that they do not affect the rating of more senior debt, nor do they require the issuance of shares. This would allow the group to raise funds without altering its politically balanced Franco-German share structure.
The board's approval of the A350 today would give a much-needed boost to morale at Toulouse-based Airbus.
The group has been hit during the past year by industrial problems with its flagship A380 superjumbo programme and management infighting at EADS.
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