Civilnet
Businessman Mikhael Baghdasarov, the owner of Armavia Airlines, is being “persuaded” by the Armenian government to delay the process of filing for bankruptcy. In the event of voluntary bankruptcy, loans provided to the airline by Armenian banks will have to be classified as bad debts, and as a result, mandatory standard indicators will deteriorate. Sources close to Armavia have told Civilnet that Baghdasarov wants to begin the process of filing for bankruptcy (which would be to his benefit), but the ruling regime will not allow him to do so.
Armavia announced two months ago, on March 29, that it was suspending all flights and initiating the process for filing for bankruptcy. But the company has not yet submitted a formal application for bankruptcy.
Armavia has serious financial commitments to Armenian banks that granted it loans (sometimes at the request of the government) without carrying out a full risk assessment. If Armavia is declared bankrupt, those banks will face severe problems. Although the main bulk of Armavia’s loans have been secured by collateral (the company’s airplanes and administrative buildings have been impounded), once the court accepts the voluntary bankruptcy suit by the debtor, the banks will be obliged to classify the loans as bad debts. Simply said, the debtor is recognized as insolvent, and the banks acknowledge the loans as irredeemable. Certainly the banks will be able to recoup some of their money after the sale of the impounded property, but they will be forced to reduce their capital.
The Central Bank of Armenia’s publication “Commercial Bank Loans According to Sector” reported that the loan portfolio as of end of April for air transport operations in Armenia was 17 Billion AMD (approximately US $42million). Although Armavia suspended flights in April, the loan portfolio for the airline sector has fallen since then by US$700,000.
According to Civilnet’s sources, Baghdasarov will try to secure the release of his impounded airplanes, and use his Bombardier CRJ plane for the Tbilisi-Yerevan flight. The Georgian airline Georgian Airways plans to start regular flights between Yerevan and Tbilisi, and Baghdasarov is in negotiations with them to use the plane from Armavia’s fleet.
“To repay the loans and release his impounded planes, the businessman has put up for sale his company Mika Cement, which is currently standing idle,” noted the source. But the news agency MIKA Limited, which also belongs to Baghdasarov, denied this. The equipment at Mika Cement’s Hrazdan plant is outdated and inefficient, and professionals say modernizing it would require an additional US$20 million in investment. Baghdasarov tried unsuccessfully in 2008 to sell Mika Cement to the Russian RATM Cement Holdings.
According to Civilnet’s source, Baghdasarov is looking at the possibility of returning to Armenia’s airline industry. He has expressed a desire to take part in the tender announced by the Civil Aviation Agency for the granting of licenses for Armenian airline companies. Currently, Baghdasarov is in discussions regarding his possible participation in the bid either through a company to be newly created, or by investing his fleet in any one of the existing Armenian airline carriers that have operating permits.
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