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Analysis: XL Leisure Group – what happens next?

What happens when a company like XL Leisure Group goes under?

First, administrators are appointed by the bank if the company has big borrowings, which XL does.

Second, a company can continue trading when it is under administration.

The decision lies with the administrators who decide whether to continue trading or not. While trading, a buyer could emerge and a rescue package put together. The administrators’ choice is based on whether that company has enough money to service day-to-day running costs.

From statements made by XL’s administrators so far, and the fact that XL aircraft are grounded, it appears XL is short of funds and it has failed to coin any refinancing. At this point, the administrators will be assessing XL’s assets.

Whether it owns its own aircraft or not will be an issue. Travel Weekly was investigating this among other issues at time of writing.

The administrators would have grounded flights for several reasons: it would be unfair and unwise to rely on pilots and crew to concentrate on their jobs and safety when they knew they were unlikely to be paid for their work.

Concentration is likely to be low when your livelihood is at risk. No doubt XL would struggle to pay airport fees too, hence aircraft being clamped.

Last, the administrators will have to decide which of XL’s debts, if any, can be paid off. Usually, the taxman is the first beneficiary. Staff, under European law, should be paid at least basic statutory redundancy. The bank too will want to be repaid as much as is physically possible.

And suppliers will queue up for reminbursement from anything left. A big question hangs over just how big XL’s pot is.

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