Bust air firm bought for £7

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By Ian Fraser

Published: The Sunday Times

Date: 27 June 2010

Corporate Jet

Buy-back deal allows Corporate Jet Service directors to avoid millions of pounds of debt to unsecured creditors

Directors of an aviation business that went bust owing HBOS £113m were able to buy it back from the administrators for an initial payment of just seven pounds.

The deal enabled the directors of Corporate Jet Services (CJS), a mini-conglomerate which included a regional airline, business aircraft, luxury motorboats and aviation maintenance firms, to avoid millions of pounds of liabilities to unsecured creditors, including HM Revenue & Customs. HBOS wrote off £60m of CJS’s £81m overdraft in 2008.

Those involved in the deal include David Mills, head of Quayside Corporate Services, a financial adviser, who had a close relationship with HBOS. He advised or sat on the boards of scores of its corporate clients, many of which went bust when the banking crisis hit in 2007. The other directors who participated included Robin Southwell, chief executive of EADS UK, the defence and aviation group, and Tony Shakesby, formerly an accountant at PriceWaterhouseCoopers.

In early 2007, HBOS asked PWC to investigate CJS, one of the bank’s clients. The review confirmed the company was insolvent and recommended administration. David Chubb and Michael Jervis, the administrators from PWC, decided against auctioning the assets, telling creditors the company had “insufficient funds for a prolonged marketing campaign, which would also have been detrimental to customer confidence”.

Instead, they put CJS into administration on September 26, 2007, selling the business the same day to Quest Aviation Services. Quest, an off-the-shelf company specifically created by the CJS directors, bought CJS for £7. A few months later it paid an additional £49,999 but failed to stump up €10m (£8.2m) it was supposed to pay by February 2008 to secure ownership of the most profitable subsidiary, a Germany-based maintenance company. Quest continues to run the German subsidiary.

In a statement, PWC said: “The transaction was completed and deferred consideration is still being received.”

This article was published on page 3 of the Business section of The Sunday Times on June 27th, 2010. To read it on The Sunday Times site click here