Devon to write off £1m Exeter Airport debt

Devon County Council will have to write off more than £1m outstanding from the Exeter Airport sale, Council leader John Hart has said today.

Having only received £185 from the £1,049,000 outstanding from sale of Exeter Airport cocunillors at the cocunil’s cabinet earlier today councillors said that they were unlikely to ever recover the

The money was lost when Regional and City Airports (RCAL), the company that bought the stake, went into liquidation after defaulting on interest payments.

Devon sold its stake in Exeter airport  to RCAL in January 2007,  under a Share Purchase Agreement taking £60m as immediately with a further £1.04m to be paid five years after the sale linked to tax relief .

This delayed payment was unconditional and was supposed to be payable whether or not RCAL had actually claimed the relief.

However with the economic downturn and a genral reduction in annual passenger numbers meant that the financial position of the airport had changed considerably from when the airport was sold and during its initial years of trading.

When DCC pressed for the payment of the final sum due, it became apparent that RCAL, who had taken out extensive loans with secured lenders, would struggle to settle the bill.

In 2012, after protracted discussions, DCC agreed to extend the repayment period of the Tax Deed over a five year period with staged payments and interest.

RCAL made the first such payment (an interest-only payment of £20,000) in January 2013 but when a second payment of interest was due, RCAL defaulted and following this default, DCC and RCAL held meetings in an effort to resolve the situation.

Shortly thereafter, DCC was informed that RCAL was selling its stake in EDAL to the Rigby Group and that immediately afterwards RCAL would be entering into liquidation, as required by its secured lenders.

In March this year, the Liquidator announced that it was in a position to declare a final dividend to DCC and a cheque for £185.38 was sent to DCC.

In a report to the cabinet a council employee writes: “Clearly this is a disappointing sum. However, this was expected and in the Cabinet meeting of 10 July 2013 Members acknowledged that it was unlikely that DCC would receive the monies owed by RCAL under the Tax Deed.

“Despite this, it should not be overlooked that DCC received 60 million for the airport. After debts were paid from the proceeds of sale, 48 million has been set aside and used to fund numerous projects across Devon.

“On top of this, an additional sum of 48 million has been raised through using the proceeds of the airport sale to lever in extra funds from external sources to further invest in projects across Devon.”

Projects such as the new Haven banks centre and parts of the Exeter central library refurbishment.

DCC has had discussions with the Rigby Group, new owners of Exeter Airport to request that the term of the Special Share be extended beyond 31 December 2016; however the Rigby Group has declined this request.