MINOAN Group will continue to owe its lenders close to £1 million after it hands over its travel agency business as a means of repaying the bulk of an £8.3 million debt that started out as a £5m loan forwarded in October 2013.

The firm, which will be left as the developer of an as-yet unstarted luxury resort on the Greek island of Crete when the transfer of Stewart Travel completes, has confirmed it will also have to seek additional funds “in order to continue to meet its costs and to advance the [Crete] project”.

Read more: Minoan’s lender to step in as buyer of travel arm

The sale of Stewart Travel to lender Zachary Asset Holding, which took over Minoan’s debt in early July, was announced earlier this month after Minoan failed to secure a buyer on the open market.

The business had been seeking to sell its travel agency since December 2017 after the interest rate on its debt, which was originally owed to Jersey-based Hillside International Holdings, increased from eight per cent to 10%. Its accounts for the year to the end of October 2017 reveal that at that point its debt stood at £6.1m.

Hillside had originally lent the cash with a three-year term, but extended that from October 2016 to July 2017, then to December 2017 and again to June this year.

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 and twin brothers Robin and Alexander Haller.

In an announcement to the stock exchange Minoan said yesterday that Zachary is paying just under £6.6m to acquire the Stewart Travel business and will then lend Stewart almost £782,000 to repay an inter-company loan to Minoan, leaving Minoan with an outstanding debt to Zachary in the region of £900,000.

“The board appreciates the continued support and forbearance of [Zachary], especially as regards the additional sums it has lent in recent years in order to support the group’s overheads whilst continuous efforts were made to secure the planning permission for the [Crete] project,” the company said in its announcement.

Read more: Minoan gets new on-demand creditor as term on £5m loan rolls on

“Following completion, the loan balance of approximately £900,000 will remain due from the company to [Zachary] under the terms of the revised facility agreement.

“It is the intention of the directors to look to refinance this when an opportunity to do so becomes available in order to reduce the group’s financing costs and to release the security for other possible debt-based financing.

“With the disposal of Stewart Travel with its historic contribution to the group’s overheads the company will be seeking additional funding in the near term in order to continue to meet its costs and to advance the [Crete] project.

“Such funding may take the form of equity and/or debt finance ahead of a realisation of some or all of its interest in the project.”

Minoan first submitted plans for the 6,000 acre Crete development in March 2012 but permission was not granted by the local authorities until 2016. While that decision had been opposed, the group received definitive permission to move ahead with the project last year.

Despite this, work on the site has yet to get started because Minoan has not yet secured an investment partner.

The project is yet to generate any income for the business and in the six months to the end of April this year losses in that division widened by 67%, from £839,000 to £1.4m.

Read more: Minoan to raise cash as sale of travel arm is delayed

Cruise specialist Stewart Travel, on the other hand, saw its turnover rise by 17 per cent to £4.9m over the six-month period while pre-tax profits increased from £170,000 to £455,000.

That business will now form part of Brooklyn Travel, a company incorporated by Zachary last month. Minoan managing director Duncan Wilson and Stewart Travel senior managers Rick Green and Brian Cassidy will collectively own a 25% stake in Brooklyn Travel.

Brooklyn Travel’s debt to Zachary will incur interest at a rate of 10%.

Minoan said that it “remains hopeful that the next 12 months should see significant progress toward the monetisation of the [Crete] project”.

Earlier this month the business confirmed that its chairman, Christopher Egleton, would see his £320,000 annual fee halved until the project starts making money.