Saturday, July 31, 2010

WRAPUP 2-Haggling delays 3.5 bln euro A400M bailout

Thu Feb 25, 2010 12:34pm EST Related News Airbus partners OK A400M rescue plan: sourceTue, Feb 23 2010Airbus A400M partners reach financing deal -sourceTue, Feb 23 2010EADS awaits A400M, tanker decisions; shares riseTue, Feb 23 2010UPDATE 3-Airbus owner studies new A400M rescue offerTue, Feb 16 2010Airbus and buyers intensify push for A400M dealTue, Feb 2 2010 Stocks & &

* Disagreement over composition of one support tranche

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* France to host possible signing ceremony on March 8

* Bail-out to provide 3.5 billion euros in mixed aid

* EADS stock down 1.4 pct, in line with European blue chips

(Adds background, details, closing shares)

By Julien Toyer and Sabine Siebold

PALMA DE MAJORCA, Spain, Feb 25 (Reuters) - European nationsagreed on Thursday to pump in 3.5 billion euros ($4.7 billion)to save the delayed Airbus A400M airlifter, but left key detailsunresolved after more last-minute haggling over loans and jobs.

Technical problems have pushed the troop plane four yearsbehind schedule and 11.2 billion euros over budget, threatening10,000 jobs. After savings and writedowns, Airbus parent EADS(EAD.PA) still faces a hole of 5.2 billion euros.

The A400M is due to provide airlift capacity to Britain,Belgium, Luxembourg, France, Germany, Spain and Turkey.

Confirmation of the overall size of the rescue package cameafter EADS accepted a 10 percent increase in the price of theplane worth a total of 2 billion euros towards cost overruns.

"The company is no longer making further financial demands,"French Defence Minister Herve Morin said after talks betweenbuyers on the sidelines of European Union defence talks.

Some countries plan to defer deliveries of aircraft as a wayof raising the unit price, rather than stumping up new cash.

The plan also includes 1.5 billion euros of top-up support,billed by officials as guarantees to be repaid from exports.

An upbeat but inconclusive statement released afterseven-nation talks on the Mediterranean island of Majorca papered over tensions over the cost to each nation.

"Defence ministers consider that significant progress hasbeen achieved during the negotiations with industry at statesecretary (junior minister) level," the statement said.

"Nations have made an offer to the industry and after havingreceived a letter in response from EADS, it will be evaluated.Defence ministers hope this will help to reach an agreement."

Delegates said buyers had not yet agreed among themselves onthe composition of the 1.5 billion euro financial support, anissue which may have an impact on the allocation of jobs as wellas the size of provisions in the EADS full-year accounts.

The proposed deal leaves EADS with A400M losses of 1.7billion euros on top of 2.4 billion written off. But it could beforced to make a provision for 3.2 billion if it has to acceptthe top-up as a loan rather than an advance on future sales.

Buyers will meet in Paris for a possible signing on March 8-- a day before EADS must reveal the size of provisions againstA400M losses in its 2009 results.

There have been doubts over whether Britain and Turkey wouldjoin the loan deal, while Germany has not taken a decision.

Morin said Spain, which on Wednesday announced an "agreementin principle" to save the A400M, was pushing for any countriesthat failed to contribute to the 1.5 billion euros of extraguarantees to renegotiate their share of construction work.

STICKING POINTS

EADS shares, which have moved in step with prospects for adeal, closed down 1.4 percent at 14.53 euros, in line with otherEuropean blue chips .FTEU3.

Delegates said Germany was holding out on a number of pointsincluding sensitive military needs such as terrain-huggingsoftware that EADS wants to delay installing to save costs.

An EADS letter seen by Reuters called for assurances onthree fronts -- that individual nations should not weaken theircommitment, buyers should limit requests for optional extras andthat they should clarify the 1.5 billion euros of guarantees.

The plea from EADS Chief Executive Louis Gallois drew amixed reaction, with some buyers refusing to endorse anythingother than a terse acknowledgment. Press releases to trumpet afinal deal were shoved back in the drawer.

Speaking in Tokyo earlier, Airbus Chief Executive Tom Enderssaid he expected an agreement on the rescue package soon.

"I think we"ll get a very significant contribution ... Weare confident that we can now continue the project," he said.

German carmaker Daimler (DAIGn.DE), the largest shareholderin EADS, is also anxious for a deal. It hopes to book anyindirect charges before March so it can pack the loss into itsalready dreadful 2009 accounts, sweeping the risks off thisyear"s balance sheet before they can sully its turnaround plans. (Additional reporting by David Brunnstrom, Mariko Katsumura,Tim Hepher, Matthias Blamont, Christiaan Hetzner, editing byWill Waterman) ($1=.7421 Euro)

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