Blue O Two – what actually happened

As reported in Scuba Diver, dive specialist tour operator Blue 02 Ltd was the latest casualty of the COVID pandemic in the diving industry, but the Blue O Two brand lived on via a renaming of Scuba Tours Worldwide Ltd.

While the news was greeted warmly by many customers, there were some who were sceptical of the whole scenario, and so the company has released a second statement:

Thank you from the bottom of our hearts for your continued support and belief in us. We care passionately about our customers and our staff. Blue O Two really has been our life’s work. So, it’s an under-statement to say we have been overwhelmed by your support.

Understandably sceptical

Whilst the majority of customers have been supportive, some have been sceptical – and we understand this. We’ve seen it in social threads and we’ve had direct conversations with people.

We fully understand certain perspectives and accept there is some confusion around
what actually happened. The reality is very different to what, in some cases, has been suggested.

We’re going to try to explain why.

What Actually Happened

We started Blue 02 Ltd in 2004. Since its inception, as Directors, other than salaries we have never been paid a dividend. All financial resources have always been reinvested back into the business.

The impact of COVID resulted in total shutdown of the travel industry. During this time, we had to support our teams. While we initially used the government backed furlough scheme, this was not designed to cater for the needs of the travel industry.
Very early on in the pandemic we brought back team members to manage cancellations, process refunds and re-bookings. Unfortunately, there was no tailored specific support available for the travel industry, unlike other retail sectors. This put added financial pressure on the business.

Initially, the expectation was that the pandemic would be a six month problem and life would return to normal by September 2020. We are now in December 2021 and travel is only slowly starting to return to some form of normality, some 20 months later. Travel rules have been confusing and consistently changing. They have been described as a travel lottery. Trying to navigate these dynamic conditions was almost impossible.

Like a lot of businesses in early 2020, and again in early 2021, Blue 02 Ltd borrowed
a significant sum of money in order to survive. These funds were backed by the
government and designed to support the economy. They gave businesses a chance to
beat COVID. Of course, this wasn’t free money – we owed that money back. In fact, we refunded to customers more than what we borrowed.

As we refunded customers and supported our teams, the losses mounted. This was
purely due to COVID and was through no fault of our own. In September 2021 it looked like travel was re-opening. Our core destinations of Egypt and Maldives were taken off the government red list. All the team was ecstatic and the Directors had a clear plan to trade through COVID losses and maintain Blue 02 Ltd as a going concern.

What Changed?

The ATOL license was due to be renewed as normal on 30 September 2021. On
1 October we were granted a renewal of our ATOL license. However, as a result of the financial damage caused by the impact of the pandemic and in the interests of the consumer, the CAA placed certain conditions on our license, giving us a short time to comply.

Unfortunately, this required a large cash injection (substantially more than what we
had available) and a transition into a different operating model moving forward – this
ultimately made the business unviable in its current state.

We engaged with professional restructuring experts in early October and worked closely with them to try to find a solution for the company. They conducted an accelerated mergers and acquisitions process seeking offers for both the shares and the business and assets.

The opportunity was marketed extensively, including to potential trade buyers within the travel industry (both in the UK and overseas) and to debt and private equity investors.

They ensured we were compliant with all the relevant regulations (including ‘SIP 16’)
– we had never been through this before and could not have done it without their
professionalism and commitment.

For four weeks we worked tirelessly trying to raise a very substantial amount of money. We were prepared to lose a majority of what we had worked for over 18 years if it meant Blue 02 Ltd could survive.

A number of parties declared an initial interest and even signed non-disclosure
agreements to permit further detailed discussions. We were almost successful – we
reached advanced discussions with a potential investor. However, despite our best
efforts, investors were deterred at the last hour. This was for several reasons: the ongoing risk associated with COVID; the lack of industry-specific government support for the travel sector; conditions imposed on the ATOL license; and the level of advance deposits.

We were emotionally and physically exhausted. Blue 02 Ltd was facing total closure.
This would have resulted in everybody losing their jobs. It would have also resulted in
over 100 families working for suppliers in less developed countries losing livelihoods.

All this with COVID still looming.

We kept Blue 02 Ltd going and kept people travelling by injecting personal monies into the business during this process. We did this knowing we would never see a penny back.

All the time we were still trying to find a solution to salvage what we could and save jobs.

Throughout this time, the team had no idea what was happening in the background, nor the pressures we were facing.

The Insolvency Act

The administration regime in the Insolvency Act exists to promote a rescue culture and provide viable businesses with a mechanism (in whole or part) to move forward in a regulated manner. It is overseen by insolvency professionals and with scrutiny by the independent evaluators.

Despite the intensive marketing process, closure was looking inevitable given the lack of other proceedable offers. As Directors, we considered that there was only one choice to save what we could – a management buyout under a pre-pack administration deal. At the very last minute, and against all the odds, we were able to raise capital for the new company. We made a formal offer to buy certain assets and liabilities of Blue 02 Ltd through Scuba Tours Worldwide Ltd (a newly formed company that has never traded).

In light of there being no other proceedable offers, the administrators accepted the offer and full consideration was paid to the administrators by Scuba Tours Worldwide Ltd.

The Best Outcome

As a result of this deal a substantial part of the business has been saved. Hundreds of
customers’ holidays will be delivered by Scuba Tours Worldwide Ltd at its own expense.

The net result is that 100% of jobs were saved and approx. 1,700 future holidays were protected. We are now actively recruiting more team members to provide more support to our customers as we rebuild the business.

Those customers covered by an ATOL license had their monies protected by the CAA.
Another group of customers had monies protected by a financial failure insurance policy.

Assets that were not part of the transfer remain with Blue 02 Ltd and are being managed by the administrators.

It has been really tough. It really has. But we do live to fight another day – and we
believe it will be very bright. Thank you again for sticking with us. And for asking all your questions – both tough and otherwise. We have had a grilling sometimes but we, and hopefully you, are better for it now our situation is better understood. We are nothing without our customers and our team.

As the world recovers from the COVID pandemic, Scuba Tours Worldwide Ltd T/A Blue
O Two is well placed to provide inspirational liveaboard diving experiences well into the future.

The entire team is hopeful and looks forward to welcoming you all again soon.

Best wishes

Jason Strickland and Nathan Tyler
Directors

Scuba Tours Worldwide Ltd T/A Blue O Two

PHOTO CREDITS: Kenzo Kiren