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Monarch engineers scramble for rescue deal

By Mark Kleinman, City editor
The engineering arm of Monarch Airlines is this week scrambling to put together a financial restructuring deal amid the threat of a possible winding-up petition from the taxman.
Sky News has learnt that Her Majesty's Revenue & Customs (HMRC) has drawn up plans to take action against Monarch Aircraft Engineering (MAEL) over an unpaid tax bill, the size of which was unclear on Thursday evening.
The move raises questions over the future of a business which employs more than 800 people and provides critical services to Britain's aviation sector, working with airlines including Cathay Pacific, easyJet, Norwegian, Virgin Atlantic and Wizz.It comes almost exactly a year to the day since the budget carrier which owned MAEL went bust, leaving more than 100,000 Britons stranded across Europe and in need of the biggest repatriation exercise since the Second World War.People close to the situation said that HMRC had yet to serve a winding-up petition but confirmed that one had been discussed between the engineering group's stakeholders in the last few days as they seek to resolve its future.
Monarch engineers scramble for rescue deal

Image:
A Monarch plane prepares for take-off
MAEL said it was "not the subject of a winding-up order or any other form of administration or insolvency process".Insiders said there was optimism that a "cleaned-up" MAEL freed of the legacy liabilities generated by the Monarch airline could have a bright future, with a large chunk of the revenues lost when the carrier collapsed already having been replaced by new customers.Technically still a subsidiary of Monarch Airlines, MAEL is not in itself in administration but is saddled with debts totalling well over €100m, according to insiders.Sources described that position as "unsustainable".The bulk of that is secured debt held by Greybull Capital, the investment firm which owned Monarch for three years before administrators from KPMG were called in when regulators declined to renew its licences.The Air Travel Trust (ATT), which helps to meet the cost of refunds and repatriation when ATOL licence-holders go bust, is thought to be owed roughly €15m by Monarch's engineering arm after the debt was transferred to it from its former parent.Several sources said that one possibility being explored by KPMG and MAEL was to launch a Company Voluntary Arrangement (CVA), a mechanism which has been used by dozens of retailers and restaurant chains this year to reduce their obligations to creditors.
Monarch engineers scramble for rescue deal

Image:
Monarch's collapse helped competitors pick up important airport slots and market share
If employed by MAEL, such a move could impact on the claims of unsecured creditors including the ATT, which falls under the auspices of the Civil Aviation Authority (CAA), with Greybull also expected to write off some of its substantial debt and provide new capital to the business.New capital would be provided by MAEL's existing stakeholders, according to one source, with no external investors being approached about injecting funds into the business.
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