Sunday, October 7 9:47 AM SGT

Swissair creditors to sue banks: report

LONDON, Oct 7 (AFP) - A group of more than 60 banks, including some of Europe's biggest, are preparing a multi-billion-pound (dollar) legal action against Switzerland's two biggest banks over their controversial restructuring of beleaguered Swissair, a newspaper here reported Sunday.

On Monday, the day before Swissair filed for protection from its creditors, UBS and Credit Suisse came up with a 1.35-billion-Swiss-franc (835-million-dollar) rescue package, agreeing to buy Swissair's 70-percent stake in Crossair for 260 million Swiss francs to allow the regional airline to carry on as the dominant partner.

The creditors -- said to include Deutsche Bank, Commerzbank and Citibank -- are furious that they were not consulted by Swissair's main commercial banks about the restructuring plan and suspect the two Swiss institutions profited unfairly at their expense, according to The Sunday Telegraph.

Under Swiss bankruptcy law, creditors can legally challenge any transactions made as many as five years before an insolvency filing, if they believe the transactions were undertaken to the detriment of some creditors or to the benefit of others, the weekly said.

"Legal action is almost inevitable," the paper quoted an unnamed banker as saying.

"UBS and Credit Suisse are saying they had to act quickly to avert a crisis, but the banks are outraged that they have been left with a mountain of debt.

"They are also furious the two Swiss banks appear to have walked off with the jewel in the crown for a cheap price," the banker added.

The Sunday Telegraph said the institutions ready to sue are owed around nine billion Swiss francs (5.50 billion dollars) which was lent to Swissair over the past two years.

UBS denied as "far from the truth" that it bought the stake on the cheap while allowing the Swiss flag-carrier to collapse and leaving the way for Crossair to cherry-pick the doomed airline's best routes, according to the broadsheet.

Beleaguered airline Swissair will this weekend outline its definitive flight plan up to October 28, company spokesman Andre Dose told the Swiss news agency Agence Telegraphique Suisse.

He said the 450 million Swiss francs given on Wednesday by the government will not be enough to keep all of Swissair's planes in the skies up to the end of October, when some of the flights will be taken over by Crossair.

Swissair, quasi-bankrupt and humiliated by the grounding of its aircraft and stranding of passengers earlier this week was only able to take to the skies again with the state lifeline.

-- Anonymous, October 06, 2001