3.29 The PPP has changed the nature of the risks faced by NATS. As a public body it was protected from the risk of insolvency. Its costs were passed through to its customers. The major financial risks NATS faced were the uncertain availability of public sector funding and the effects of its inability to deliver major capacity- enhancing projects on time and to budget. The PPP brought new freedoms, but also exposes the company to other business risks (see paragraphs 3.31 to 3.40 below). The financial situation is now much more complex than before the PPP, because strengthening the position of the company now requires positive and complementary responses from many more parties, principally:
■ the Government as minority shareholder;
■ the seven members of the Airline Group who form the controlling shareholder;
■ possible additional equity investors;
■ the company's employees;
■ the lending banks; and
■ the economic regulator, which is statutorily independent of government.
3.30 To be able to draw on its bank loans, NATS must certify to its lenders that it is not aware of the occurrence of any event of default. 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 the conditions attaching to its loan facilities. As a result, NATS agreed that it would not seek to draw further on its loan facilities and would fund capital expenditure from operating cash flow. In this situation significant management time and effort is diverted away from managing the future development of the business, to managing short-term cash flow. The solution to these symptoms of corporate financial distress can only lie in three areas - raising revenues, cutting costs and raising alternative finance.