Aer Rianta's loan agreements specifically prevent the State company from giving up ownership of both Shannon and Cork Airports, according to its lawyers, who warn that taking steps to do so could trigger early repayment of part of its €484 million debt.

A letter to the company's chief executive, Ms Margaret Sweeney, from its solicitors, Dublin law firm, Arthur Cox, points out that the conditions of its bank loans place a number of restrictions on Aer Rianta.

These include reducing its capital, ceasing to carry on a substantial part of its business, or making disposals above a certain value.

The letter, seen by The Irish Times, specifically lists one of the restrictions as: "Aer Rianta ceasing to retain ownership of, and to conduct operations from, Cork and Shannon.

"Breach of these provisions would, in the absence of an express waiver to the contrary from the relevant lenders, constitute an event of default (a breach of the loan's terms and conditions)."

It adds: "The occurrence of an event of default would entitle the relevant lenders to accelerate and demand immediate repayment of their loans, together with accrued interest."

The letter points out that early repayment of €32 million or more of Aer Rianta's debt on foot of a default, could in turn trigger a default of the terms of its €250 million listed bonds, whose holders could also demand repayment.

It concludes that waivers would be required from some lenders and possibly Deutsche Bank, the trustee of Aer Rianta's bonds, to ensure that the company's restructuring would not result in it defaulting on its debts.

However, the letter also states that the lenders' view of Aer Rianta's viability could ultimately determine their response to the restructuring plan.

It also makes it clear that a waiver could involve some form of substantial payment to the bank or banks involved. Aer Rianta has not sought a waiver from any of its banks at this stage.

A spokeswoman for the Department of Transport last night said that the company, and officials from the Departments of Transport and Finance, were discussing issues relating to the loan conditions, but could not comment any further than that.

Deutsche Bank wrote to Aer Rianta a year ago asking if the break-up plan would affect the bond holders' interests. Aer Rianta said at the time that it did not believe it would, as it would be a "restructuring while solvent", which the bond specifically permits.

However, the Arthur Cox letter states that the bond trustee would, after consulting with bond holders and taking legal advice, ultimately determine whether or not the break-up plans were "restructuring while solvent". It also says that as far as the firm is aware, the Department's own legal advisers, Matheson Ormsby Prentice (MOP), agree with this view.

The State Airports Bill, 2004, which will make the break-up of Aer Rianta into three separate airport authorities for Dublin, Cork and Shannon legally possible, passed the Seanad stage of the Oireachtas yesterday.

The Minister for Transport, Mr Brennan, has made it clear that he wants the Bill enacted as soon as possible.

During the course of the debate, he said that Aer Rianta's bankers had not reacted to his plans.

"There has been no suggestion on the part of any of the funders to initiate action under 'event of default' type clauses of the appropriate loan agreements," he said.

He said he was aware that they contacted the company by letter on one occasion and that they were happy with the reply.