AeroCentury has entered into a stalking horse agreement with Drake Asset Management 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 its Chapter 11 Bankruptcy protection filing date, AeroCentury said that believes it has sufficient cash on hand to support its ongoing operations. Depending upon the length of the COVID-19 pandemic 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,” Michael Magnusson, CEO of AeroCentury, said. “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.
“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, AeroCentury owned 12 aircraft. Ten of those aircraft are encumbered by a first priority lien securing the company’s approximately $83.2 million of secured indebtedness held by Drake, while two are on lease to lessees in Kenya and not subject to the first priority lien of Drake.
Morrison & Foerster and Young Conaway Stargatt & Taylor are serving as legal advisors to AeroCentury. B. Riley Securities is serving as financial advisor and investment banker to AeroCentury.