flying macaco
20th Dec 2008, 16:28
An interesting article on the collapse of XL (from ttglive):-
Last week, PW, the man at the helm of the collapsed XL Leisure Group, revealed how things started to unravel this summer for the UK’s third-largest tour operator.
In this compelling sequel to his first interview since the group went bust, PW reveals how within hours of striking what he thought was a rescue deal, conversations were, unbeknown to him, taking place which he believes sealed XL’s fate.
Rescue thwarted
As TTG revealed last week, PW had held talks with the two Icelandic banks behind the group, Landsbanki and Straumur Investment Bank, about a refinancing plan.
This would have seen XL and other charter airlines and operators merge under a venture called Phoenix Wings.
That meeting had broken down on August 14 mainly because the banks could not come to an agreement on how the debt would be financed. But although they did not want to do the Phoenix Wings deal, they said they would back XL as a business.
PW flew back to Crete, where he had been on holiday with his family, with mixed feelings. He knew the deal meant he would lose his £36 million shareholding in XL, but at least he felt the business would be saved – or so he thought.
Financial meltdown
Unfortunately, at that time, the financial markets were getting more desperate by the day and PW said Straumur was eager to get additional guarantees backing its credit revolver.
“When arriving back in Crete, I learned that Straumur had met with Barclays, XL’s bankers, without any of the XL directors, to try to negotiate a future solution to XL’s fuel hedging instruments, provided by Barclays.
“In essence, the result of that meeting was that Barclays got really nervous and closed down these instruments, crystallising an immediate loss of $42 million for XL.
"As a result, Barclays froze all of XL’s accounts,” he said.
“Suddenly, things were totally out of order. XL couldn’t even pay its direct operating bills, even though the accounts had more than sufficient funds,” he revealed.
“At that point, XL could not trade without support from its lending group. Straumur continued to provide minimal credits to keep the business running and by doing so, it succeeded in forcing the XL board to give security over XL Germany and XL France.
“Without the panic situation that was created, I believe we could have sold our assets or raised new securities.”
PW claimed that XL France and XL Germany were debt-free and had no registered charges, and that XL France alone had recently been valued at between €70 million and €110 million.
“If we had sold those two assets in an orderly market, we would have covered the majority, if not all, of our debts,” he said.
“In July we had tested the market with a short teaser on XL France. This was carried out by an investment bank and we received positive replies from Thomas Cook and Tui.
“Unfortunately, we were so confident of the banks refinancing XL that we did not take this process any further. In hindsight, this was a mistake,” he admitted.
“In addition, Virgin was very keen to buy Travel City Direct. A deal was still being discussed days prior to the company’s failure.”
PW added: “I understand Virgin has concluded a deal with [the administrators] for the company name and data, so I assume Travel City Direct will trade again under the Virgin umbrella at some point in time.
“XL needed between £60 million and £70 million to see it through the winter and with the huge drop in fuel price, the requirement would have been reduced.”
Clock ticking
“On September 9, we met with the lender group in the afternoon, but by 20.30 they confirmed they weren’t going to back the business in cash terms,” he recalled.
“The following morning, Eimskip announced that it would be prepared to write off the $280 million it had guaranteed. Had we known this seven days earlier, it’s easy to assume things would have ended differently.
“It is most likely we would have sold XL for a cash injection only. After all, XL France alone was worth in excess of this, let alone the other brands XL owned. We simply ran out of time.”
During this period the XL board met every day, sometimes twice, PW revealed.
“Every step was carefully evaluated and decided with advice from our legal team. On the evening of the 9th, the board requested that all customer deposits be ring-fenced in a special account and not used for operational expenses.
“That night [September 10] I didn’t sleep.
"The entire team carried on for 24 hours trying to get a deal done. The next night was also horrendous. At that point, we had come to realise that hope was running out. And on top of that, we really didn’t want XL to fail on 9/11.”
PW explained that when all hope was gone, the XL board and its legal team planned for XL to cease operations at 2am on Friday September 12, when all aircraft would be in the UK or in the air en route home, causing minimum disruption.
“At 1am, I sent an email to all my staff and told them all that had happened and how we’d done everything we could,” recounted PW, tears welling up in his eyes at the memory.
Regaining his composure, he continued: “I went home and tried to get some sleep, but had to be up at 5am and back at the Gatwick Hilton for the press conference. I thought about having my say there, but didn’t.
“Those tears I cried up on that stage weren’t crocodile tears: they were real. Afterwards, I went back to the office. It was very emotional. Some people wanted to hit me and some wanted to kiss me. My daughter and niece were two of many made redundant on that day.
“I got my bag and went home to my wife.”
Mistakes
“If I’ve made mistakes it’s that I should never have got someone else in to run a business I was a majority shareholder in.
“I should have encouraged PO to step down from Silverjet, as no one can be 100% focused on one job while having two roles.
“And I should have got corporate refinancing experts like International Rescue in to help. They could have saved XL.
“It should never have gone belly up. Due to very bizarre outside conditions, what happened, happened. The whole thing was illogical, believe me, and I want people to know this.”
PW had nothing but praise for the CAA.
“They could not have been more supportive. They really worked with us to try to save the business. I was also delighted that [the divisions in] Germany and France, and the 750 staff who work in those two businesses, were saved. Both were really cash positive.”
Kiss Flights
PW was determined to put a lid on the rumour that he was behind Kiss Flights and that it had been set up as a “parachute” business to drop into when he knew XL was in trouble.
“I do drive a car with the number plate K155 XLA. It just means ‘I love XL Airways’, nothing else,” PW insisted. “I do love the name Kiss, but Kiss Flights is nothing to do with me.”
PW was also keen to defend his fellow colleagues’ reputations.
“When people have a go at individuals like PM [former Freedom Flights managing director], I want them to realise that these people lost a lot of money too,” he added.
“I want to make sure staff at XL and the likes of MG [the managing director of The Co-operative Travel who has been publicly critical of the XL situation], are aware that PM and the rest of the management team who had shares in XL all lost a personal fortune.
“In total, the management owned over a third of the company and lost over £100 million. I personally lost over £36 million,” said PW.
“The doubters have got to stop thinking that this was some machiavellian plan.”
Any thoughts??
Last week, PW, the man at the helm of the collapsed XL Leisure Group, revealed how things started to unravel this summer for the UK’s third-largest tour operator.
In this compelling sequel to his first interview since the group went bust, PW reveals how within hours of striking what he thought was a rescue deal, conversations were, unbeknown to him, taking place which he believes sealed XL’s fate.
Rescue thwarted
As TTG revealed last week, PW had held talks with the two Icelandic banks behind the group, Landsbanki and Straumur Investment Bank, about a refinancing plan.
This would have seen XL and other charter airlines and operators merge under a venture called Phoenix Wings.
That meeting had broken down on August 14 mainly because the banks could not come to an agreement on how the debt would be financed. But although they did not want to do the Phoenix Wings deal, they said they would back XL as a business.
PW flew back to Crete, where he had been on holiday with his family, with mixed feelings. He knew the deal meant he would lose his £36 million shareholding in XL, but at least he felt the business would be saved – or so he thought.
Financial meltdown
Unfortunately, at that time, the financial markets were getting more desperate by the day and PW said Straumur was eager to get additional guarantees backing its credit revolver.
“When arriving back in Crete, I learned that Straumur had met with Barclays, XL’s bankers, without any of the XL directors, to try to negotiate a future solution to XL’s fuel hedging instruments, provided by Barclays.
“In essence, the result of that meeting was that Barclays got really nervous and closed down these instruments, crystallising an immediate loss of $42 million for XL.
"As a result, Barclays froze all of XL’s accounts,” he said.
“Suddenly, things were totally out of order. XL couldn’t even pay its direct operating bills, even though the accounts had more than sufficient funds,” he revealed.
“At that point, XL could not trade without support from its lending group. Straumur continued to provide minimal credits to keep the business running and by doing so, it succeeded in forcing the XL board to give security over XL Germany and XL France.
“Without the panic situation that was created, I believe we could have sold our assets or raised new securities.”
PW claimed that XL France and XL Germany were debt-free and had no registered charges, and that XL France alone had recently been valued at between €70 million and €110 million.
“If we had sold those two assets in an orderly market, we would have covered the majority, if not all, of our debts,” he said.
“In July we had tested the market with a short teaser on XL France. This was carried out by an investment bank and we received positive replies from Thomas Cook and Tui.
“Unfortunately, we were so confident of the banks refinancing XL that we did not take this process any further. In hindsight, this was a mistake,” he admitted.
“In addition, Virgin was very keen to buy Travel City Direct. A deal was still being discussed days prior to the company’s failure.”
PW added: “I understand Virgin has concluded a deal with [the administrators] for the company name and data, so I assume Travel City Direct will trade again under the Virgin umbrella at some point in time.
“XL needed between £60 million and £70 million to see it through the winter and with the huge drop in fuel price, the requirement would have been reduced.”
Clock ticking
“On September 9, we met with the lender group in the afternoon, but by 20.30 they confirmed they weren’t going to back the business in cash terms,” he recalled.
“The following morning, Eimskip announced that it would be prepared to write off the $280 million it had guaranteed. Had we known this seven days earlier, it’s easy to assume things would have ended differently.
“It is most likely we would have sold XL for a cash injection only. After all, XL France alone was worth in excess of this, let alone the other brands XL owned. We simply ran out of time.”
During this period the XL board met every day, sometimes twice, PW revealed.
“Every step was carefully evaluated and decided with advice from our legal team. On the evening of the 9th, the board requested that all customer deposits be ring-fenced in a special account and not used for operational expenses.
“That night [September 10] I didn’t sleep.
"The entire team carried on for 24 hours trying to get a deal done. The next night was also horrendous. At that point, we had come to realise that hope was running out. And on top of that, we really didn’t want XL to fail on 9/11.”
PW explained that when all hope was gone, the XL board and its legal team planned for XL to cease operations at 2am on Friday September 12, when all aircraft would be in the UK or in the air en route home, causing minimum disruption.
“At 1am, I sent an email to all my staff and told them all that had happened and how we’d done everything we could,” recounted PW, tears welling up in his eyes at the memory.
Regaining his composure, he continued: “I went home and tried to get some sleep, but had to be up at 5am and back at the Gatwick Hilton for the press conference. I thought about having my say there, but didn’t.
“Those tears I cried up on that stage weren’t crocodile tears: they were real. Afterwards, I went back to the office. It was very emotional. Some people wanted to hit me and some wanted to kiss me. My daughter and niece were two of many made redundant on that day.
“I got my bag and went home to my wife.”
Mistakes
“If I’ve made mistakes it’s that I should never have got someone else in to run a business I was a majority shareholder in.
“I should have encouraged PO to step down from Silverjet, as no one can be 100% focused on one job while having two roles.
“And I should have got corporate refinancing experts like International Rescue in to help. They could have saved XL.
“It should never have gone belly up. Due to very bizarre outside conditions, what happened, happened. The whole thing was illogical, believe me, and I want people to know this.”
PW had nothing but praise for the CAA.
“They could not have been more supportive. They really worked with us to try to save the business. I was also delighted that [the divisions in] Germany and France, and the 750 staff who work in those two businesses, were saved. Both were really cash positive.”
Kiss Flights
PW was determined to put a lid on the rumour that he was behind Kiss Flights and that it had been set up as a “parachute” business to drop into when he knew XL was in trouble.
“I do drive a car with the number plate K155 XLA. It just means ‘I love XL Airways’, nothing else,” PW insisted. “I do love the name Kiss, but Kiss Flights is nothing to do with me.”
PW was also keen to defend his fellow colleagues’ reputations.
“When people have a go at individuals like PM [former Freedom Flights managing director], I want them to realise that these people lost a lot of money too,” he added.
“I want to make sure staff at XL and the likes of MG [the managing director of The Co-operative Travel who has been publicly critical of the XL situation], are aware that PM and the rest of the management team who had shares in XL all lost a personal fortune.
“In total, the management owned over a third of the company and lost over £100 million. I personally lost over £36 million,” said PW.
“The doubters have got to stop thinking that this was some machiavellian plan.”
Any thoughts??