Can of whup-ass opened by The Times today:
Not everyone understands how commercial loans work. So how lucky Mark Anderson can explain. The Flybe boss is trying to prise £100 million out of the government. And all via Boris Johnson’s new “levelling up” policy: one aimed, apparently, at keeping the bank accounts of the airline’s owners up to the levels they like.
Still, don’t accuse Mr Anderson of demanding any sweetheart terms for a business owned by the billionaires behind Virgin Atlantic — Sir Richard Branson and Delta Air Lines — plus New York hedge fund Cyrus Capital and Stobart. As he told Flybe staff: “We are in conversation with the government around a financial loan — a loan, not a bailout — a commercial loan, but that is the same as any loan we’d take from any bank.”
Really? So why not talk to a bank, then? Short answer: because after the stunts that Flybe’s owners have pulled with its assets, they’d struggle to get a commercial loan. As Companies House filings show, there’s almost zero security left.
Having bought the assets for just £2.8 million last February, one of the owners’ first moves was to strike a deal with Global Loans Agency Services: a trustee for their stakes that takes security over certain assets. So it’s a sort of middleman between Flybe’s owners and its assets. Or at least those that can’t fly off: lessors already had security over most of the 67 turboprop planes.
The rest of the assets, including buildings, aircraft engines and receivables, then look to have been divvied up between the owners. Filings show that Flybe’s holding company — Connect Airways — is both “chargors” and “guarantors” for asset deals. Indeed, the document says: “Each chargor shall attach to a visible part of each item of specified equipment owned by it and with a value in excess of £10,000 . . . a clear and distinctive label.”
The upshot? Well, should Flybe go bust, the owners have a charge over specific assets: enough, maybe, to eliminate any losses. True, they claim to have injected £110 million. But it’s questionable how much of that was cash. Stobart’s £45 million, say, was mainly its regional airline and aircraft-leasing wing, which experts reckon were worth nothing like that. To boot, by using Global Loans, the owners avoid a bunfight over any future carve-up.
On top came the owners’ wheeze with Flybe’s Heathrow slots. They switched Newquay flights under the taxpayer-funded “public service obligation” regime to Gatwick: a dodge, potentially to the benefit of Virgin Atlantic, that unlocked an estimated £60 million of value.
And now, on top of a £10 million holiday on air passenger duty, they want a £100 million taxpayer loan. They can afford to inject fresh equity. Without that, no bank would lend to a loss-making airline whose wealthy owners were up to these sorts of capers. And neither should the government. Indeed, the money would be far better spent subsidising essential routes. Not minted owners intent on looking after themselves