Law And Policy
The Associated Press
Friday, May 23, 2008
Shares in Silverjet PLC were suspended Friday as the company revealed a key funding deal had failed to materialize, prompting speculation that the British business-class airline is near collapse.
Silverjet, which runs services to Newark airport in the United States and to Dubai from its base at London's Luton Airport, stressed that its planes remained in the air but said it was seeking alternative funding "as a matter of urgency."
The carrier said it had not received money agreed under a 12.7 million pound (US$25.1 million; 15.9 million) deal recently signed with Viceroy Holdings LLC, an international luxury development fund based in the United Arab Emirates and the United States.
Silverjet had sought an initial installment of US$5 million (3.2 million) from the deal's loan facility on May 2, but said on Thursday it "has yet to receive the full drawdown."
"Silverjet's working capital reserves are limited and advances under the loan facility are required as a matter of urgency," the airline said.
The announcement raised fears that Silverjet would go the same way as collapsed U.S. peers MAXjet Airways Inc. and EOS, which also started business-only services from London to New York in 2006.
All three have struggled as soaring oil prices increased fuel costs and they have failed to fill enough seats on their planes.
Maxjet was the first to fold, filing for bankruptcy protection late last year after failing to find the necessary funding to stay in business. Eos took the same steps last month.
Silverjet said that Viceroy is committed to its investment, "but they have not been able to access the funds required to give to Silverjet."
It added that it continued to hold talks "with other parties, which have confirmed an interest in investing in the company."
When it unveiled the debt-and-equity deal with Viceroy last month, Silverjet said that it would need to find funding urgently if the investment did not come off, with its working capital and residual reserves suffering amid the tough market conditions and soaring cost pressures.
Shares rocketed 26 percent in one day on news of the funding agreement as investors breathed a sigh of relief that Silverjet's future could be secured.
Silverjet shares, which trade on the Alternate Investment Market, were down 5.5 percent at 13 pence (US$0.26; 0.16) before being suspended. They had been trading above 175 pence last June.
