Global Aviation re-files for Chapter 11 bankruptcy

January 2014 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

In mid November Global Aviation Holdings Inc, the largest provider of charter air services to the US military, filed for Chapter 11 bankruptcy protection, mere months after the company emerged from its previous reorganisation process.

In a statement announcing the decision to file for Chapter 11 protection, Global Aviation noted that a number of the company’s subsidiaries, including two operating airlines, World Airways and North American Airlines, had also filed for bankruptcy protection. The company and its subsidiaries filed for bankruptcy at the US Bankruptcy Court in Wilmington, Delaware listing both assets and liabilities of $1bn each. Global Aviation cited a decrease in military contracts and commercial freight shipping as reasons for the decision to file for protection. Furthermore, documents filed with the US Bankruptcy Court revealed that, at the time of the writing, the company is currently in default on several aircraft leases, expects to see a $54m decrease in projected 2014 revenue, and has been unable to extend a forbearance agreement with its primary lender, among others.

The company said it had taken the decision to file for bankruptcy protection in order to strengthen its balance sheet and gain financial flexibility as it continues to realign its operations. Global Aviation also noted that it intends to continue to operate throughout the reorganisation process. “We intend to use the reorganisation process to help implement our plan to lower costs, stabilise our businesses, grow revenue and diversify our product lines,” said John Graber, the company’s chief executive. “We have taken a number of steps to improve our operations over the past few months, and we were making great progress. However, the continued worldwide downturn in commercial freight markets coupled with the military’s decision to immediately curtail its cargo expansion flying has made it necessary for us to undertake this court-supervised reorganization. We believe that this reorganization will enable us to reduce our debt and implement operational changes, while maintaining our commitment to safety, compliance and reliable customer service.”

Peachtree City, Georgia based Global Aviation also said in a statement that the company’s reorganisation plan will see it reduce its workforce by approximately 16 percent over the coming quarter. At the time of writing Global Aviation employs approximately 1000 people. In conjunction with the company’s reorganisation, Global Aviation also announced that it has arranged for debtor-in-possession financing, which will be provided to the company by its first lien lenders. Pending court approval, the company will utilise the newly raised financing and any cash generated from its ongoing operations to support the business during the reorganisation. Global Aviation intends to continue to pay employee wages as normal throughout the bankruptcy process. Furthermore, employees will continue to be provided with all of their benefits, including healthcare. Existing customer programs should also be unaffected by the bankruptcy filing. Vendors should continue to be paid throughout the bankruptcy process but only for those goods and services provided after the filing date of 12 November.

Global Aviation filed for Chapter 11 bankruptcy for the second time in 2012 in order to achieve ‘industry competitiveness’. The company soon embarked upon a program design to help cut costs as well as its substantial debt load. The company’s first bankruptcy filing was handled by the US Bankruptcy Court for the Eastern District of New York. Global Aviation eventually emerged from that period of bankruptcy protection in February 2013. In June 2013, the company announced the arrival of John Graber as the new chief executive.

Prior to Global Aviation’s 2012 bankruptcy, and under the company’s previous names of ATA Holdings and Global Aero Logistics Inc. respectively, two other Chapter 11 restructurings took place, in 2004 and 2008. As a result of the 2008 restructuring, the company was forced to sell another of its subsidiaries, ATA Airlines, to Southwest Airlines.

Richard Summerfield