AeroCentury Corp. Files Petition for Chapter 11 Reorganization
March 29 2021 - 7:30PM
AeroCentury Corp. (the "Company") today announced it and certain of
its subsidiaries commenced a voluntary case (the “Chapter 11 Case”)
under chapter 11 of title 11 of the United States Code (“Chapter
11”) in the United States Bankruptcy Court for the District of
Delaware (the “Bankruptcy Court”).
The Company has determined that the Chapter 11
process is the most effective next step to resolve the Company’s
outstanding indebtedness and to progress toward the Company’s goal
of continuing in the regional aircraft business in order to
preserve enterprise value for the Company’s stakeholders. The
Company will continue to operate its business as
“debtor-in-possession” under the jurisdiction of the Bankruptcy
Court and in accordance with the applicable provisions of the
Bankruptcy Code and the orders of the Bankruptcy Court. The
Company’s management of its portfolio assets and operations with
respect to its aircraft and communications and interaction with
lessees will remain unchanged, and the Company intends to pay
vendors and suppliers under customary terms for goods and services
received on or after the filing date and pay its employees in the
usual manner.
To ensure its ability to continue operating in
the ordinary course of business, the Company has filed with the
Bankruptcy Court motions seeking a variety of “first day” relief,
including authority to continue utilizing and maintaining its
existing cash management system and authority to pay its employees
in the ordinary course of business. Business operations across the
AeroCentury platform are continuing without interruption.
The Company has proposed in one of its Chapter
11 motions an auction sale (“Auction Sale”) for its assets in order
to fund repayment of its indebtedness to its sole secured lender,
Drake Asset Management Jersey Limited (“Drake”). The Company has
entered into a stalking horse agreement with Drake to acquire the
aircraft collateral securing the Drake indebtedness, subject to
higher and better bids. In the event Drake is the successful
bidder, the closing of the purchase will resolve all of the
Company’s outstanding indebtedness to Drake.
As of the filing date, the Company believes it
has sufficient cash on hand to support its ongoing operations.
Depending upon the length of the COVID-19 induced crisis and its
impact on revenue, the Company may seek access to additional
capital as the reorganization progresses.
“We hope that following final resolution of the
Drake indebtedness through the Chapter 11 sale process, we will get
speedy approval for a reorganization plan and will be able to
promptly emerge from Chapter 11,” explained Michael Magnusson, the
Company’s CEO. “AeroCentury intends to remain a public company
focusing on the regional aircraft industry. With a clean balance
sheet, we will be primed for immediate execution of a
recapitalization plan that will allow us to resume and build upon
our asset leasing, finance and management business,” Mr.
Magnusson continued. “We believe such a re-emergent, recapitalized,
and re-energized AeroCentury Corp., built upon the foundation of
our quarter century brand history and strong reputation in the
regional aircraft space, and equipped with renewed ability to take
advantage of many opportunities as the recovery of the travel and
aviation industry heats up and the headwinds from the COVID
pandemic ease, could present a compelling story to investors.
Uncertainty, however, remains as to how quickly the air passenger
industry will recover and if and when financial markets will be
willing to re-invest substantial equity and/or debt capital into
regional aircraft. Nevertheless, management is steadfast in its
commitment to bringing the Company through this unprecedented
financial and industry turmoil.”
As of March 29, 2021, the Company owned twelve
aircraft. Ten of those aircraft are encumbered by a first priority
lien securing the Company’s approximately $83.2 million of secured
indebtedness of the Company held by Drake, while two are on lease
to lessees in Kenya and not subject to the first priority lien of
Drake.
Additional Information
Morrison & Foerster LLP and Young
Conaway Stargatt & Taylor, LLP are serving as legal advisor,
and B Riley Securities, Inc. is serving as financial advisor and
investment banker.
The Bankruptcy Court filings and additional
information regarding the Company’s restructuring, and the claims
process for suppliers and vendors are available at
http://www.kccllc.net/aerocentury, or can be requested from the
Company's claims agent at (866) 967-1783 (U.S./Canada) or
(310) 751-2683 (International) or emailing
AeroInfo@kccllc.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
The statements herein regarding the Company’s
plans to resolve its outstanding indebtedness through the Auction
Sale, the Company’s plan to maintain operations in the ordinary
course, the Company’s continuation of the operation of its business
as a “debtor-in-possession”, the Company’s plan to continue
utilizing its existing cash management system and pay its employees
in the ordinary course, the Company’s anticipation that it has
sufficient cash to meet its obligations; the Company’s desire for
speedy approval of a reorganization plan and emergence from Chapter
11, the Company’s plan to remain a publicly-traded company, the
Company’s plans to resume and build upon its regional aircraft
leasing business and the Company’s plans to raise additional
capital constitute “forward-looking statements” as defined by the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on projections and assumptions
made by management of the Company, are not guarantees of future
performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict or control. Because such
statements involve risks and uncertainties, the actual results and
performance of the Company may differ materially from the results
expressed or implied by such forward-looking statements. Given
these risks and uncertainties, readers are cautioned not to place
undue reliance on such forward-looking statements. Additional
information concerning certain risks and uncertainties that could
cause actual results to differ materially from those projected or
suggested can be found in the Company’s filings with the Securities
and Exchange Commission, copies of which are available from the SEC
or may be obtained upon request from the Company.
Harold M. LyonsChief Financial Officer(650) 340-1888
Aerocentury (AMEX:ACY)
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