CRUCIAL negotiations on a major debt restructuring at GPA are set to continue this week. So far there has been no agreement between GPA and one major investor who is holding out against the current clan to securitise 230 aircraft forth $4.7 billion.
A spokesman for GPA said yesterday that the discussions in New York are likely to continue today, but it is understood that unless GPA is able to reach agreement soon with Public School Employees' Retirement System of Pennsylvania and the restructuring has to be aborted, GPA could be faced with High Court examinership.
PSERS fund manager Mr John Lane has declined to comment on the current difficulties with GPA, but the pension fund - which colds $39.5 million of secured CPA notes - is pressing for a better deal on the $100 million of second preference shares it invested in GPA at the height of the market.
Alone among the 140 banks, mutual funds and institutions who cave invested funds or lent money GPA, PSERS has refused to agree its assent to the deal. The agreement of all the banks and institutions is required if the crucial securitisation of the 230 aircraft is to go ahead.
The $100 million in preference shares that PSERS invested in GPA has proved to be a disastrous investment for what is acknowledged to be an aggressively managed pension fund. PSERS is unlikely ever to get a reasonable return, but sources close to some of the GPA banks who have agreed to the securitisation said that the Pennsylvania fund is engaged in brinkmanship which could plunge GPA into examinership.
GPA itself cannot be seen to be making a preferential deal with PSERS, whose preference shares rank lower than GPA's $1.1 billion of unsecured debt. If GPA did a deal with an investor who has a lower status, then it could face a legal challenge from a holder of the unsecured debt who sees lower ranking investors being given preferential treatment.
There is some speculation that PSERS has adopted its aggressive position with the aim of having its preference shares bought by GE Capital - which rescued GPA free years ago - or another shareholder. It seems unlikely however, that any of the other GPA banks or investors would compromise its own position by stepping in to satisfy a demand from PSERS that most of the other investors believe is unreasonable.
Examinership for GPA, however, would not improve PSERS' position and, on the contrary, would mean that its $100 million of preference shares would rank very low in any restructuring of GPA that a High Court examinership might put together. "It's a matter of who blinks first," was how one source described the current impasse between GPA and PSERS.
If a deal is done and the $4.5 billion securitisation goes ahead, the funds will be used to repay about $2.5 billion of debt which matures in September 1997, as well as some other unsecured debt. The deal will also raise about $500 million in cash for GPA.
In the past two years, GPA has sold assets worth $900 million, resolved litigation that could have cost it $600 million, sold some associated companies, renegotiated new orders and extended $1.2 billion of bank debt by an extra year.
