16 NATS' initial financial structure saw NATS' debt rise from £330 million to £733 million to cover the sale proceeds paid to the Government. Despite warnings from both NATS itself and the CAA, that such a high level of debt would leave NATS vulnerable to adverse events, the Department concluded that the fears were misplaced. The Department's conclusion was based on modelling 19 adverse scenarios. The scenarios that were modelled all assumed consistent growth in air traffic, in our view an optimistic assumption compared with the experience of the past 30 years, which have seen three sudden and severe checks to growth in UK air traffic. CSFB emphasised to us that any reduction in the level of NATS' debt would have reduced sale proceeds, probably pound for pound.
17 NATS' ability to borrow has been constrained by the extent of its ability to service the debt. In addition to the provision of a £733 million facility to finance the acquisition of NATS, the Airline Group negotiated further bank facilities of £690 million to fund future capital expenditure, and a working capital facility of £30 million. The impact of the events of September 11th on NATS' revenue base were such that the company may have been construed as being in breach of certain of the provisions within its banking facilities. As a result, NATS agreed that it would not seek to make further drawings under the loan facilities over and above the £24 million already drawn and would fund capital expenditure from operating cash flow.