William Malcolm

CITIC Looks To Exit Smartwings

China’s state-owned CITIC Group is in negotiations to sell off its 49.9 percent stake in the Czech aviation group Smartwings. The Chinese company has been unwilling to make a capital injection into the struggling airline.

“They don’t want bankruptcy, but their willingness to pour more money into the company is minimal. And now they are negotiating the sale of their share,” according to a source familiar with the course of negotiations, HN reports. According to the newspaper, the airlines have not yet successfully negotiated with banks to secure additional money for next season.

The Chinese reportedly announced their intention to sell their minority stake in the airline in late July. Meanwhile, they want to exit with at least a minimal profit. Therefore, the price they’re demanding is more in line with a pre-pandemic valuation than today’s market. According to Zdopravy.cz, the Czech shareholders rejected the Chinese offer calling it exaggerated.

A representative of CITIC in the Czech Republic, Jaroslav Tvrdík, said that the Chinese bought their share in 2015 for CZK 1 billion.

“According to the original ideas, the Chinese and the majority of airline owners, such as Jiří Šimáně and Roman Vik (who is also the CEO), were to invest hundreds of millions of koruna in Smartwings. For another CZK 900 million from banks, the state was to guarantee through the state insurance company EGAP, ” writes HN. According to them, the unresolved situation among shareholders is a risk for lending banks. Also, the Chinese are said to be able to block the increase in the registered capital of Smartwings, which will be needed for the company to survive.

“It simply came to our notice then. We are working on a solution with banks, and within a few weeks, we should be able to apply for support to EGAP, ” said Šimáně. At the same time, EY is joining the Smartwings restructuring as a consultant. Shimane believes there will be more flying next season once a vaccine for COVID-19 is available. Smartwings, therefore, expect to reach at least 70 percent last year.