Monarch finalises deal with Greybull

Dino D'Amore
By Dino D'Amore October 27, 2014 17:09

Monarch finalises deal with Greybull

Monarch Group has finalized the £125 million (US$200 million) recapitalisation by selling to investment firm Greybull Capital.

Greybull will purchase 90 percent of Luton, England-based Monarch from the Mantegazza family, the parties said in a statement late yesterday. The remaining 10% stake will be contributed to the Pension Protection Fund.

Seabury Group successfully advised the Monarch Airlines Group with respect to the completion of its strategic review and restructuring program. Under the program Monarch has secured ₤125 million of permanent capital and liquidity facilities provided by Greybull Capital anchored by a ₤50 million capital commitment, with contributions from the Group’s prior shareholders, principally the Mantegazza family. Greybull also acquired 90% ownership interest in Monarch, with the remaining 10% to be contributed to the Pension Protection Fund (PPF).

Greybull is a family office that manages investments in private companies across a diversified range of industry sectors. Greybull will provide significant capital to Monarch in order to grow the Group and build on its long-established heritage and trusted brand name. The sale and recapitalization complete a comprehensive turnaround plan that will help the airline return to profitability and reinvent itself as a low-cost scheduled airline focused on short-haul markets.

Monarch Group CEO, Andrew Swaffield, said, “I am delighted to welcome the Greybull team as the new owners of the Monarch Group.  We have a shared vision for the strategic direction and prospects for the business, and I am looking forward to working with them to implement the exciting plans for building our future. I would like personally to thank all Monarch employees who have been hugely supportive of the initiatives, which were essential to complete this transaction. I am very proud to be leading such a team – together we will be building a great future for the Group.”

The main outcomes of Monarch’s strategic review and restructuring, which have led to the successful transaction with Greybull, are:

• Optimize fleet from 42 to 34 aircraft, and revised agreements with lessors to either mark-to-market or early return of 10 aircraft from the current fleet
• Securing a new Boeing fleet order for 30 737 MAX 8 aircraft with deliveries from 2018 to 2020, providing a cost-effective and uniform fleet by late 2020
• Both long-haul and charter flying to end by April 2015
• Airline network to specialize on Monarch’s ‘heartland’ of scheduled short-haul European leisure routes, with increased average frequencies, aircraft utilisation, productivity and profitability
• Focus on five U.K. airport bases – London Gatwick, Manchester, Birmingham, London Luton and Leeds-Bradford – and closure of East Midlands from summer 2015
• Material concessions agreed with employees across the Group to enable the successful restructuring, including reductions in pay of up to 30%, with more than 90% of unionized staff voting to accept changes, and some 700 redundancies, two-thirds of which were voluntary
• Reduction of the Group’s operating cost base, in line with other low-cost carriers, and increased efficiencies across the business
• Resolution of the Group’s pension deficit through agreement with the Pensions Regulator, PPF and the Trustee of the Monarch Airlines Limited Retirement Benefits Plan which will result in the Plan being assessed for entry into the PPF. The PPF would then hold a 10% stake in the Group, in line with its principles in restructurings such as this. The Pensions Regulator has cleared the restructuring. The pension deficit as per the company’s balance sheet was previously £158 million and the current estimated shortfall to secure full benefits is around £660 million.

Dino D'Amore
By Dino D'Amore October 27, 2014 17:09