Creditors owed up to £650million in total from the collapse of regional airline Flybe may only receive a tiny fraction of their cash – if they get anything at all.
Joint administrators for the defunct Exeter-based company have revealed about 900,000 claims have already been made and continue to arrive.
The value of cash demanded by unsecured creditors is now at between £600million and £650million and could become “materially higher once all claims have been received”.
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Joint administrators at global business consultancy EY are dealing with the claims and said who gets what has yet to be determined.
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But EY has said it intends to make a legal application not to distribute the money which has been set aside for unsecured creditors because it would not be cost effective.
In other words, so little cash is in the pot the creditors would receive hardly anything so it is not even worth distributing it.
EY said there is only a maximum of £600,000 in this pot meaning unsecured creditors would get less than £1,000 each. Some are owed tens of millions.
An EY spokesperson would only say: “Distributions to unsecured creditors as part of the administration are yet to be determined and will be communicated to creditors in due course.”
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Even though joint administrators at EY have completed the sale of the Flybe - renamed FBE Realisations 2021 Limited (in Administration) – business assets to a new company called Flybe Ltd, which hopes to start flights in 2021, they are still settling claims and collecting in cash from debtors of the original firm.
And they have confirmed the huge scale of debts owed by Flybe before it went into administration in March 2020, after failing to secure a £100million Government rescue package.
Large amounts are owed to secured creditors, who own charges over assets and are highly likely to get their money back, including £136million to various lenders, £127million in mortgages over aircraft and engines and more than £11million to Lloyds Bank’s Cardnet credit card arm.
Already £6.6million has been paid to secure charge holders including £3.1million to BRAL Trustees from the sale of the Flybe Training Academy to Devon County Council.
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In addition, £3.2million is owed to preferential creditors, mainly in wages, holiday and pension contribution claims from hundreds of former Flybe employees who lost their jobs when the firm hit the skids.
EY has said: “We currently estimate that preferential dividends will be paid in full towards the end of this year.”
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That leaves non-preferential creditors, “effectively the company’s unsecured creditors” according to EY. The joint administrators said they continue to receive claims from creditors “most notably, substantial claims from financiers and lessors”.
The five largest claims are from BRAL Trustees, owed £96.5million; NAC Aviation, owed £90.5millon; Norddeutsche Landesbank Girozentrale, owed £82.9million; Environment Agency, owed £51.8million; and GE Engine Services, owed £17million.
Documents filed at companies house said EY intends to make an application under the Insolvency Act 1986 for an order not to distribute the prescribed part of the assets, set aside for unsecured creditors, on the grounds that “the cost of making a distribution to unsecured creditors would be disproportionate to the benefit of doing so”.