A COMPANY that provided an on-demand loan to Glasgow-based leisure group Minoan has enabled the business to pay off the debt by stepping in to acquire its profit-making travel agency arm.
In an announcement to the stock exchange AIM-listed Minoan said that Zachary Asset Holdings, which took over the £5 million debt in July, had agreed to buy Stewart Travel, which has been up for sale since December last year.
While Zachary had the right to call in Minoan’s debt at the end of August, the announcement said it is not expected to do this now heads of terms for the acquisition of Stewart Travel have been agreed.
Read more: Investors snub £1m Minoan share offer
“Following the consideration of approaches from other prospective buyers, negotiations have been taking place in good faith with the group’s primary lender, Zachary Asset Holdings Limited to buy [Stewart Travel], notwithstanding that the debt facility has been extended only to 31 August 2018,” the firm’s announcement said.
“In the circumstances, the board does not believe that the loan will be called pending the completion of negotiations and the culmination of the transaction, which should see it repaid in full.”
Zachary took over Minoan’s debt in early July after the company previously negotiated several extensions to a loan first taken out with Jersey-based Hillside International Holdings in October 2013.
Read more: Minoan’s travel arm in good health ahead of expected sell-off
The loan from Hillside originally came with a three-year term, but that was later extended to June 2017 and again to December 2017.
In December 2017 the term on the loan was further extended to June 2018 and the interest rate charged on the debt increased from eight per cent a year to 10%.
The group also put its travel arm up for sale in December and attempted to raise £1m via a share offering that it was forced to abandon after failing to generate enough interest.
Chairman Christopher Egleton said at the time that the lacklustre response was down to the firm trying to raise cash in the run-up to Christmas.
In July the term of the loan was extended to the end of August and the debt was passed to Zachary, which is understood to be run by the family of Hillside directors Robin and Alexander Haller, who are understood to be twin brothers.
While the sale to Zachary requires the approval of Minoan’s shareholders, if it goes through the group will be left as the developer of a luxury resort on the Greek island of Crete that is yet to get off the ground.
The company has overcome longstanding planning issues relating to the 6,000 acre site but is yet to secure investment to bring the project forward.
Cruise specialist Stewart Travel, which has branches across Scotland and last year took over Edinburgh-based Morningside Travel, is by far the most successful part of the Minoan Group.
Read more: Minoan gets new on-demand creditor as term on £5m loan rolls on
In the six months to the end of April 2018 turnover in the travel agency arm rose by 17 per cent to £4.9 million while pre-tax profits increased from £170,000 to £455,000.
The Greek resort arm, meanwhile, generated no revenues but saw its losses widen by 67% from £839,000 to £1.4m.
The firm said that Mr Egleton’s £320,000 chairman’s fee would now be halved “until such time as there is a significant monetisation event in relation to the project”.
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