Struggling UK regional operator Flybe Group has indicated it will be forced to begin winding-up proceedings if shareholders do not approve an offer from Connect Airways.
While acknowledging the the offer price was "disappointingly low", it says it had to recommend the revised offer on 15 January as the only way to ensure it could continue as a going concern.
Flybe Group first announced a deal to sell the company to Connect Airways, a consortium comprising arms of Virgin Atlantic, Stobart Group and investment company Cyrus Capital, on 11 January.
But when Flybe was unable to satisfy the conditions to draw down on a proposed bridge loan facility of up to £20 million, the carrier needed immediate funding.
"Because in the time available there were no other parties in a position to meet both Flybe's funding needs and Flybe's banks and credit card acquirers, the Flybe directors concluded, and were so advised, that the only way to avoid Flybe and Flybe Limited having to be placed into administration was to enter into a new agreement to sell Flybe's operating subsidiaries to Connect Airways," it says.
That revised deal was sealed on 15 January. At the same time the bridge facility was revised, providing Flybe with liquidity to continue operations.
Upon completion Connect will take over the trading businesses and transfer a £2.8 million payment to Flybe Group, which will be left as an empty company with no assets or subsidiaries.
This divestment will not require approval from Flybe Group shareholders. The shareholders will only be allowed to vote on an offer by Connect, amounting to £0.01 per share, for the group.
"Accordingly, following completion of the subsidiary sale, if the scheme is not approved, the Flybe directors intend to take steps to wind up the company and shareholders are likely to receive no value for their shares in Flybe," it says.
"The Flybe directors believe that the terms of the acquisition remain in the best interests of Flybe shareholders as a whole and unanimously recommend that Flybe shareholders vote in favour of the resolutions."
The offer has come under criticism from key shareholder Hosking Partners - which has called for the replacement of Flybe chairman Simon Laffin and for a review of the sale process.