The bankruptcy auction of Silver Airways is set for May 28 after a judge approved the terms proposed by the troubled airline and a stalking horse bidder — despite the $5.775 million offer falling far short of the roughly $400 million Silver owes its creditors.
In an eloquent 20-page order, Judge Peter D. Russin of the U.S. Bankruptcy Court for the Southern District of Florida said he would allow the auction to proceed because key Silver creditors supported the move at a May 15 evidentiary hearing.
“It is not lost on the Court that the Debtors borrowed collectively several hundred million dollars, yet the contemplated asset sale values total at present less than $10 million,” Russin wrote in an order issued Monday.
“Yet the record also reflects something more: the informed and express support of nearly every major administrative claimant and the prospect, though far from guaranteed, that competitive bidding on Silver Airways assets and the sale of Seaborne’s assets may yield meaningful payment,” said Russin.
Silver and Seaborne filed for bankruptcy protection in December via separate petitions, citing a need to restructure their finances and secure additional capital. The move came six years after Seaborne voluntarily reorganized in 2018 and announced it had secured a new $4.2 million credit facility and entered into a purchase agreement with Silver.
Earlier this month, Silver Airways designated Argentum Acquisition Co. LLC as a stalking horse bidder for a sum of $5.775 million.
The deal does not include Silver’s subsidiary, Seaborne Airlines, according to the 99-page asset purchase agreement. However, it contains a clause that “in the event that no Qualified Bid … is submitted or received at the Auction for the assets of Seaborne,” the Argentum deal will be interpreted to include the assets of both airlines for no additional consideration.
Russin considered that issue, and the fact that the Argentum bid might be the only one, in approving the auction.
The court does not “minimize the risks posed by the possibility that the sale of Silver Airways will not yield an overbid or that Seaborne may go unsold and be handed to the [Debtor in Possession] Lender without additional consideration, pursuant to the DIP Financing agreement. But those risks have been disclosed, debated, and embraced by those who would bear their burden,” Russin wrote. “Nearly every administrative claimant of consequence — Azorra, Jetstream, UMB, TrueNoord, NAC, World Fuel, the airports — stood before the Court, weighed their options, and urged the Court to approve the path now adopted,” he said.
However, the judge noted that there might still be a separate offer for Seaborne.
“The Debtors anticipate finalizing negotiations with a purchaser for the Seaborne assets in the very near future. After finalizing definitive documentation for a sale of the Seaborne assets, the Debtors will file a separate motion to approve bid procedures and a sale process for Seaborne,” Russin wrote.
Through an extensive sales and marketing process, Silver and Seaborne reached out to more than 75 parties, established data room access for 15 to 20 potential buyers, and confirmed continued interest from multiple regional airlines, according to Monday’s filing. At least one Seaborne bidder offered $3.75 million in cash, but that deal ultimately fell through for lack of a deposit, according to Russin.
Additionally, prospective bidder Angelo Scolari told the court at the May 15 hearing, “that he had been for months actively performing due diligence and considering a bid for Silver Airways that would include assumption of the $3 million in closing-date liabilities. He confirmed that an affiliate of his company, Rengen Energy Solutions, was considering a $6 million cash bid with an additional $250,000 topping fee. He also testified that he had previously submitted a nonbinding letter of interest in the $10 million range. Although not committing to bid, he expressed serious interest and confirmed his intent to negotiate with administrative creditors,” Russin wrote.
The court found his testimony “candid, albeit necessarily cautious,” the judge said.
Ultimately, nearly every administrative creditor of significance has affirmed that, though the risk is real that they will end up vastly underpaid, the alternative is worse, said Russin. “They chose the possibility of at least partial recovery through continued operations over the certainty of loss through collapse,” he wrote.
Indeed, U.S. Trustee Mary Ida Townson filed a motion April 10 to dismiss the case because she felt there was little chance the airlines would succeed in reorganizing. A hearing on the motion was set for May 9 but has been rescheduled to June 24 in light of the stalking horse bid and subsequent auction.
Silver and Seaborne provide a critical link between St. Croix and St. Thomas and also serve the wider Caribbean region, with Silver headquartered in Fort Lauderdale, Florida, and Seaborne in San Juan, Puerto Rico.
Despite the bankruptcy filing, Silver Airways has assured customers that all tickets remain valid and that flights will continue to operate as usual.
