Full evidence
here, extract below. Read it and weep.
WF.
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In other words, all they (TAG) paid was £50 million to get 46 per cent of the whole of this business?
(Ms Lomax) Yes.
That is absolutely unbelievable. That left NATS lumbered with a debt of £735 million which was quoted as part of the purchase price, although the purchaser never paid it, because you are having to pick up this bill, are you not, NATS?
(Mr Everitt) Yes. It is a debt of the company.
That is 735 million you are paying for them to buy your business. What about the interest on that 735 million? That does not include the interest charge as well, does it?
(Mr Everitt) Yes. We have a loan put in place as part of the restructuring of the finances of the company at completion. It is our job as a company to service that loan both in terms of interest and to repay it.
You are paying the interest as well?
(Mr Everitt) Yes.
Over 20 years, if it were ten per cent, that would be another £800 million and it is probably more than that, is it not?
(Mr Everitt) I think the interest rate is around seven per cent.
In that case, it is £600 million. In addition to paying back the 800 million, you are also lumbered with £600 million of interest charges, all to enable someone else to buy your business.
(Mr Everitt) It will be quite a lot less than that because we will be paying back part of the loan over the 20 years.
The average loan is 400 million. In 20 years it is £600 million so you are paying £1,400 million for someone else to buy half your business effectively. That is correct, is it not?
(Mr Everitt) The two shareholders, Her Majesty's Government and the Airline Group, structured the finances of the company at completion and determined that they would put this amount of debt in place. That represented the proceeds to the government ----
That is not answering the question. The fact of the matter is that you are lumbered with a debt which is now making it impossible for you to borrow on the market even as easily as you could have done before the PPP. That is a fact, is it not?
(Mr Everitt) We have a large debt and that is making it difficult.
You are in a worse position than you were before you had a PPP and you are saddled with paying for someone else to buy it. Permanent Secretary, when this was up for grabs, did the bidders know that they would be able to offload the loan -- I assume they must have done because it was part of the discussion -- onto NATS?
(Ms Lomax) Yes.
One of the puzzling things is that the Treasury, who are usually pretty good at working out what they might get from a sell-off, were expecting 500 million. They got 800 million and they could not believe what was in their greedy little hands. Does it not in a way explain the situation because if the bidders knew that they could bid and it did not matter what they bid; NATS would pay, they could keep up bidding knowing NATS would pick up the bill. What the Treasury got was an actual receipt from a most deceptive and non-competitive way of selling a business on.
Who represented the purchasers?
(Ms Lomax) The Airline Group.
Yes.
(Ms Lomax) They are not here.
That is another witness we could have done with. We are not doing very well at all today.
(Ms Lomax) The Airline Group put the bid in on the basis that they would not be taking dividends out. They are not looking to make a profit out of this.
You do not get 46 per cent of a business when you have only paid one-sixteenth on purchase price. When you take into account that it is then a further twelfth it is also the interest element which brings us up to 14 million. It is one pound every £20-worth of purchase.
(Ms Lomax) There is an issue about how much a business carrying this much debt is going to be worth. The equity shareholders are the last in line. If the business is very encumbered with debt, there is going to be less for them even if they were going to take dividends out.
Treasury, since you only expected 500 million, why did you take the 800 million? Why did you not leave the other 300 million in to reduce the debt and therefore give NATS more flexibility?
(Mr Glicksman) 800 million was the amount that was offered by the best bid. It would be quite difficult to go back to them and say, "This is too much. We do not want so much money for this sale." What we were looking for was best value for money and there is no reason why this should not have been the best value for money.
It is the most flawed project I think I can ever remember coming before this Committee.