Germany expects Air Berlin rescue loan to be repaid in full

BERLIN/FRANKFURT, Nov 2 (Reuters) - The German government has said it still expects the 150 million-euro ($175 million) loan granted to Air Berlin (LSE: 0GPE.L - news) to be repaid in full, after a court opened formal insolvency proceedings against the carrier on Wednesday.

The loan granted in August had kept Air Berlin planes in the air while administrators held talks with prospective buyers of the airline's assets.

"The loan of 150 million euros will be repaid from the proceeds of asset sales," a spokeswoman for the economy ministry said on Thursday.

Air Berlin ran into trouble after a rapid expansion of the business left it saddled with debts while increased competition from low-cost carriers meant it struggled to make a profit in recent years. The airline carried out its final flight on Friday.

Following the formal opening of the insolvency proceedings on Wednesday, Air Berlin quoted its administrator as saying its assets were not expected to be sufficient to satisfy the "existing priority claims" beyond the costs for the insolvency proceedings.

But a person familiar with the matter said the government loan was secured against the expected proceeds from the asset sales, meaning it would be repaid first.

Deals with Lufthansa (Xetra: LHAB.DE - news) and easyJet to buy parts of the business, which are subject to European Union approval, are expected to bring in up to 250 million euros.

"Even (Taiwan OTC: 6436.TWO - news) in the worst-case scenario, there should be no less than 150 million," the person said. ($1 = 0.8584 euros) (Reporting by Alexander Huebner and Gernot Heller; Writing by Victoria Bryan; Editing by Greg Mahlich)