Stobart Group on hook for $100m of regional carrier's liabilities

Deal talks: Stobart Group is headed up by CEO Warwick Brady

John Mulligan Twitter Email

April 21 2020 02:30 AM

THE UK's Stobart Group has about $100m (€92m) of liabilities connected to Aer Lingus Regional operator Stobart Air, the Irish Independent understands.

The previously undisclosed scale of the liabilities come as it's engaged in talks to acquire struggling Dublin-based Stobart Air and Propius, both of which it once owned outright.

Stobart Air and Propius are now part of Connect Airways, in which Stobart Group has a 30pc stake, and which is in administration in the UK.

Stobart Air is facing the prospect of examinership here.

It's understood that Stobart Group's liabilities include a total of about $25m related to maintenance reserves for eight aircraft that are part of the Stobart Air fleet. Those aircraft were part of a 2017 sale and leaseback agreement engineered by Stobart Group via Propius with German lessor Goal.

As part of that deal, the eight ATR turboprop aircraft were leased for a period of 10 years to Propius, with Stobart Group having guaranteed those leases. The aircraft are used by Stobart Air.

However, the current contract for the Aer Lingus Regional service that's operated by struggling Stobart Air expires at the end of 2022.

While Propius can terminate its leases for the eight aircraft after six years, Stobart Group remains on the hook for the full 10-year term of the leases, it's understood.

It's believed those post-contract lease obligations, coupled with deposits owed, amount to about $65m.

Stobart Group declined to comment yesterday when asked about the details of the liabilities, and how it would manage those liabilities if it is unsuccessful in its efforts to buy Stobart Air, or if Stobart Air fails to extend its Aer Lingus contract beyond 2022.

The Irish Independent revealed last week that Stobart Group has entered negotiations to buy a 49pc stake - and effective control - of Stobart Air from accountants EY, which is acting as administrator of Connect Airways, of which the Dublin-based carrier is a part.

Buying that stake would prevent the immediate crystallisation of the liabilities that Stobart Group has which are related to Stobart Air. Stobart Group is attempting to acquire the stake in advance of any move that would see Stobart Air fall into examinership.

But buying the 49pc stake in Stobart Air - the other 51pc is owned by its more than 400 staff - would also rely on the blessing of Aer Lingus.

Stobart Group, whose CEO is Warwick Brady, last week said that it is reviewing "all options" for Stobart Air and Propius.

"The board of Stobart Group believes that Stobart Air and Propius have a viable future after Covid-19 and that by working with Aer Lingus as franchise partner it can place the business on a secure footing and manage the impact of guarantee obligations in a controlled manner," it said.

Stobart Group on hook for $100m of regional carrier's liabilities

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