Today, our offices received notice of a proposed Customer Voluntary Arrangement (CVA) agreement from insolvency practitioners, Smith & Williamson, acting on behalf of Monarch Aircraft Engineering Limited (MAEL). The letters states that more than 10% of the company’s creditors have requested a formal meeting to discuss the CVA. The CVA is a mechanism for UK companies to reduce their obligations to creditors.
This news comes only days after the aircraft MRO company announced that it had agreed the terms of a new ownership structure, with a transaction in which Greybull Capital becomes the majority shareholder. In the announcement, MAEL stated that its lenders PNC “would continue to provide facilities and support, and many of the operator’s key customers have also expressed their support for the business as the restructuring progresses”.
MAEL had been making progress in securing third party MRO work and had declared that its maintenance facilities at Luton and Birmingham were fully utilised, with contracted work stretching throughout 2019. However, the letter to Aviation News Ltd today implies that the company’s debts may have spiralled out of control. A call to the offices of the MRO company confirmed the news, which responded with the following statement:
“Following the recent announcement (18th October, 2018) of its new ownership structure, Monarch Aircraft Engineering (MAEL) is completing a financial restructuring process designed to ensure robust, long term foundations for the company.
As part of this process, proposals are being put to the company’s creditors to enable MAEL to reduce its levels of debt; much of it incurred as part of cross-company liabilities it inherited when it was previously part of The Monarch Group.
The company’s two largest creditors have already pledged their support for this restructuring process.
Acceptance of the proposals by the company’s creditors will allow MAEL to establish a solid platform for growth and a long term strategy that will see the company create more jobs and greater value for its supplier partners.”
On October 4, Sky News reported that it had knowledge that Her Majesty’s Revenue & Customs (HMRC) had drawn up plans to take action against MAEL over an unpaid tax bill. That news was never confirmed. The situation today is still unclear but this is a possible reason for MAEL to opt for a CVA.