France blocks EADS fund-raising proposal

By Nicola Clark

Published: April 11, 2007

Herald-Tribune | PARIS: The French government has blocked a proposal by managers of European Aeronautic Defense & Space to raise up to $4 billion this year to help finance the Airbus A350-XWB jet, people with knowledge of the situation said. The action highlights the divisions between private- and public-sector shareholders over the group's long-term strategy.

The EADS board also failed to agree Tuesday on whether to propose a dividend for 2006, opting instead to put the question to a full shareholder vote, after French officials, including Prime Minister Dominique de Villepin, said that it would be inappropriate because of the large number of layoffs planned at Airbus.

EADS managers raised the possibility of a capital increase in January, citing the anticipated €10 billion, or $13.4 billion, in research and development costs for the A350, as well as expenses linked to a major restructuring of Airbus. The board was expected to request authorization for such a transaction at its annual shareholders' meeting May 4, but agenda documents for the meeting published Tuesday make no mention of the plan.



The EADS co-chief executives, Louis Gallois and Thomas Enders, had proposed seeking approval for a sale of up to €3 billion in bonds that would be convertible into EADS shares after about five years, a person with knowledge of the discussions said last week.

The idea was supported by EADS's main industrial shareholders, the German automaker DaimlerChrysler and the French conglomerate Lagardère, this person said, but was rejected by France, which favors a straightforward share issue for political reasons. France owns a 15 percent stake in EADS indirectly and has made known its interest in owning a larger stake.