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Rex – Regional Express: Insolvency administration and possible rescue

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The bankruptcy of Rex – Regional Express, a leading regional airline in Australia, has caused a big stir.

The company's administrator is using specific provisions of the Australian Securities and Investment Commission's (ASIC) Corporations (Externally-Administered Bodies) Instrument 2015/251 to temporarily suspend the financial reporting requirement. This decision marks an important step in the restructuring process aimed at stabilising and potentially saving the company.

Introduction: Insolvency administration and reorientation

On August 28, 2024, important developments in the insolvency administration of Rex – Regional Express were announced. The company's administrator, Ernst & Young, has applied to the Federal Court of Australia for an extension to defer financial reporting and annual general meeting obligations.

These measures are part of a comprehensive restructuring plan aimed at leading the company out of financial crisis and overcoming insolvency. Rex voluntarily filed for bankruptcy at the end of July after the company had incurred significant losses with its B737-800 aircraft over three years. Currently, only turboprop flights are being operated, while jet flights have been suspended.

Financial difficulties and insolvency proceedings

Rex – Regional Express, known for its regional air service in Australia, has struggled with financial difficulties for a long time. The cost of the B737-800 aircraft, which made up a large part of the fleet in recent years, led to significant financial losses. The company was forced to reject the aircraft and discontinue jet flights. This step was necessary to reduce financial burdens and improve operational efficiency.

At the end of July, Rex voluntarily filed for insolvency administration, a step that marks the beginning of a restructuring process. The administrator Ernst & Young is now responsible for guiding the company through this difficult period and finding possible solutions for financial stabilization.

Postponement of financial reporting and annual general meeting

A key measure in the current insolvency proceedings is the temporary suspension of the obligation to provide financial reporting. The administrator relies on specific provisions of ASIC Instrument 2015/251, which allows an extension of between six and 24 months. This gives the administrator the necessary time to conduct a detailed financial analysis and develop a comprehensive plan for future financial reporting.

In addition, the obligation to hold an annual general meeting is temporarily suspended. Normally, Rex would have to convene such a meeting within five months of the end of the financial year to inform shareholders about the company's finances and status. However, this rule is suspended in the current proceedings in order to relieve the administrator and not hinder the restructuring process.

Sale or recapitalization as a possible solution

According to a letter dated August 21st sent to creditors, the administrator's intention is to continue the Rex Group either through sale or recapitalization. This option could bring the greatest benefit to creditors. The administrator stressed that more time is needed to find an optimal solution and that the first creditors' meeting has been postponed for the time being. The next creditors' meeting is now scheduled to take place on or before November 25th.

The search for potential buyers or investors is well underway. The Australian Financial Review's "Street Talk" column named a consortium of suitors interested in acquiring Rex. Those involved include Rex chairman John Sharp, Skytraders, Allegro Funds, Bain Capital and Anchorage Capital Partners. This group is currently considering whether to make a bid for Rex. However, Alliance Airlines chief executive Scott McMillan dismissed reports that his airline was planning to make a bid, saying Alliance Airlines was not interested in a takeover.

Outlook and possible future of Rex

Non-binding offers to acquire Rex were made in mid-August and binding offers are expected in mid-September. The development of these offers will be crucial in shaping the future of Rex. If a sale does occur, it could provide the company with new financial resources and enable a sustainable future.

The challenges facing Rex are significant, but the current restructuring process offers hope for a turnaround. The temporary suspension of financial reporting obligations and the Annual General Meeting gives the administrator and interested parties time to take the necessary steps to stabilize and reposition the company. The coming months will be crucial in determining whether Rex – Regional Express can successfully emerge from insolvency and what shape the company will take in the future.

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