Troubled regional airline Flybe says it has already received the first £10 million in crucial funding as part of its takeover amid shareholder unrest over the deal.
In an update to clarify details of the sale, Flybe sought to assure that it continues to receive payments from its credit card acquirers – which has been vital to its survival.
It said: “The arrangements with the company’s credit card acquirers and banks are important to enable Flybe to continue to trade and are conditional themselves upon the SPA (share purchase agreement completing).”
The group – which is being bought by a consortium of buyers comprising of Virgin Atlantic, Stobart Group and investment firm Cyrus Capital Partners – last week overhauled its takeover after the carrier failed crucial financing terms.
Flybe said it had failed to meet the conditions for receiving a promised £20 million bridge loan under the original takeover deal as credit card banks clamped down amid fears over the airline’s financial security.
But the consortium of bidders restructured its takeover in a bid to speed up the deal and offer immediate financial support to Flybe, with a revised loan of up to £20 million.
The buyers will instead pay £2.8 million to take control of the main trading company Flybe and the online arm Flybe.com in a deal set to complete by February 22, while later completing the purchase of the wider holding company for 1p a share.
However, its biggest investor – London-based asset manager Hosking Partners – is reportedly considering legal action over the cut-price takeover, accusing the company’s directors of breaching their obligations to investors.
It is understood Hosking Partners wrote to Flybe’s directors expressing concerns that it had allowed a false market to develop by failing to notify the City of its financial position quickly enough – a letter that was also sent to other City regulators.
Flybe confirmed on Thursday that shareholders will not be able to vote on the initial sale of the main trading assets of the airline, but only the 1p-a-share of the remaining holding company.
Under the takeover plans, the airline will be combined with Stobart Air in a joint venture called Connect Airways.
Cyrus will own 40% of the new company, while Virgin and Stobart will take 30% apiece.
Flybe chief executive Christine Ourmieres-Widener said earlier this month the firm had been forced to seek a buyer due to higher fuel costs, currency fluctuations and Brexit uncertainty.
Flybe has also agreed with Vueling Airlines to sell its slots at London Gatwick Airport for £4.5 million.
Vueling is a subsidiary of British Airways owner IAG.
The funds will be paid in two tranches, one due in the next few days for slots to be used this summer, and the second due in June for slots to be used during winter.
The regional airline put itself up for sale in November after warning over profits in 2018.
The Exeter-based carrier is battling challenging conditions in the airline industry and has suffered with falling demand and a £29 million hit from rising fuel costs and the weak pound.
Flybe has 78 planes operating from smaller airports including London City, Southampton and Norwich – and flies to destinations across the UK and Europe.
It carries around eight million passengers a year.
Trade unions have already raised concerns over the impact of Flybe’s sale on the carrier’s 2,300 employees.