German accounting tricks for solving Adria's bankruptcy



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The German fund plan 4K Invest, which, at the time of privatization of Adria Airways, promised a business turnaround and conquest of the region of Southeast Europe, must have been damaged.

Our national operator, which has been billed in recent months with many delays and flight cancellations, will end this year, according to unofficial information, with one of the biggest losses in its history of more than 50 years.

Due to the poor financial situation and more than 50 million commitments, it has been under the supervision of a public civil aviation agency that handles passenger safety. He even threatened to lose his license for airplanes and landings, which meant the bankruptcy of Adria.

Lack of liquidity is also influenced by employees, which are more than 400. Due to problems with liquidity, management sends notifications about late payment of salaries to employee representatives. They did not comment on this in Adria yesterday.

Artificial money creation from the start

Now, Germany has found a way to patch holes in the balance sheet and worsen until at least early next year.

According to our information, the lack of capital will be completed in two steps:

– the company will recover the Adria brand, sold at the end of 2016 to a company related to 4K Invest funds, and at that time he paid royalties. With this maneuver, Adria really got rid of bankruptcy or bankruptcy.

– with an agreement with the government and an extension of the lease period for land in Brnik, where the Adria administration building was established and owned by the state.

This will not only strengthen Adria's asset value, but will also lead to an increase in artificial capital. And without this, 4K Invest will pay one euro of fresh cash.




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Adria: most of the money is already in the account

Chief Executive Officer of Adria Holger Kowarsch It also promises a comprehensive cash recapitalization to alleviate liquidity problems and convince the Civil Aviation Agency not to give it the most stringent size, namely, revoke licenses to fly.

In late October, he said that ten million euros in cash would be invested in Adria before the end of the year. A week ago it was corrected and the increase in capital shifted to the first quarter of next year. For this year, he promised 4 million recapitalization.




Holger Kowarsch, Chief Executive Officer of Adria Airways


Holger Kowarsch, Chief Executive Officer of Adria Airways
Photo: STA

Adria ensured that 4K Invest had received most of the promised funds and that it was a capital injection with cash. In the list of company businesses, there is no increase in capital recorded until now (yet).

In the two and a half years since the owner of Adria, German funds only invested 1.5 million euros in the company. The remaining liquidity is received by Adria at the expense of suppliers and other business partners.




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All routes lead to tax haven

4K Invest is planning a new controversial maneuver under the Adria brand, revealing the company documents we obtained on the editorial board.

From them it was proven that Adria would join a company based in Ljubljana, STBE, which bought the brand from him. The owner is Dr. Stefan Beulertz, a lawyer from Malta, was also found at the end of a complicated 4K Invest, the owner of Adria.




Malta


Photo: Pixabay

His name appears in what is called Kertas Surga, published by the International Investigative Journalists Consortium (ICIJ) at the end of last year. In 2006, Beulertz founded six companies based in Malta, a tax haven.

The STBE company had to pay eight million euros for the brand, but Adria had never seen this money. A company that is not formally affiliated with Adria returns the purchase price by cutting license fees every year.

In Adria, despite a clear connection with the STBE and the fact that the acquisition of Adria will occur, they stressed that "we are recruiting brands from independent third parties".




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Divert cash flow

This raises the question whether Adria was damaged when sold and rented back.

Adria, for example, charged more than 630,000 euros in royalties last year under a contract. In addition, it has created an additional € 1.6 million in revenue "outside the EU market". With whom he operates, it is not visible from publicly accessible sources.

Thus, with brand management, STBE generates revenues of around 2.2 million euros in just one year. With the current dynamics, in just a few years, they will pay the entire purchase price, after which the royalty will flow to net income.

Adria, on the other hand, remains not only without a significant portion of its assets, but also a loss of non-negligible income received by the STBE from the end of 2016.




Adria Airways management


Photo: Klemen Korenjak

Now, Germany has decided to restore their brand due to poor financial conditions. After already generating 8 million euros of capital in paper in 2016, it is expected to create an additional one million euros of capital again.

"This brand is becoming increasingly important for the company and for our business partners, and therefore (…) the brand will be transferred back to the parent company," explained the first husband of Adria to the worker representative.

He reassured them that this would not affect employees. There will be a reduction in operating costs, increased capital and new income through branding.




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He audited Adria's accounts, three months later he left

According to our information, brand maneuvering has become a concern for auditors who must confirm the truth and fairness of the company's financial position.

PricewaterhouseCoopers (PwC) Hedvik Hribšek, which audited Adria's balance sheet for 2016, supported the unusual sales of the brand at the end of June last year. Thus, he does not choose opinions with reservations or negative opinions.

Less than three months later, Hribškova left PwC. Asked why he left and whether his departure was related to Adria's revision, they did not answer yesterday at PwC.

Regular auditor exchange

While the public body for civil aviation found that Adria fulfilled one of the conditions for bankruptcy on the last day of the year, the new PwC auditor Dean Hartman trust Adria's management and confirm the balance sheet last year.

This year, for the first time in a long time, Adria has maintained an auditor for two consecutive years. Previously, the account was reviewed for a year by Deloitte, Constantia Plus and KPMG, with the last in 2015, when it was still state property, issued an opinion with a reservation.




PWC


Photo: Reuters

Do they know of Hribshkova's departure, they are not responsible to the Public Audit Board for auditing. They only say that the audit company is not obliged to tell them about this. The agency that runs it Mojca Majic, if not this year not discuss Adria's Audit.

"This agency conducts audits on the quality of the audit company's audit work of public interest entities, including PwC, at least once every three years," they added.

They will fly less than Ljubljana

The first person, Adria Holger Kowarsch, explained at a recent meeting that this year was very bad for the company, we studied informally.

The expansion of Bombardier's CRJ fleet will no longer be so strong, which will have an impact on flight plans. In the coming year, they will concentrate on reducing risk, especially in fuel prices, which have increased significantly over the past two years.

They will continue with chartering aircraft with crew (ACMI). The planes will be operated from eight aircraft, namely to Brussels Airlines, Austria, Luxair and also Lufthansa. In the coming year, only seven planes will fly from Ljubljana Airport, while all unprofitable routes have been removed. Therefore they will focus on profits and not on Ljubljana, which does not bring benefits.

Adria, like all other airlines, has a big problem because of the lack of pilots and other crew members. If they have enough people, Lufthansa can, in a framework called wet-rent, hand over eight additional aircraft.

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