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TERRACE STANDARD

USINESS REVIEW

0

Hawkair. creditor negotiations _
going smoothly so far, receiver

“NEGOTIATIONS WITH. Hawkair’s
‘two largest creditors are going fairly
well as “the airline seeks to lower its
overall debt, says an.official from the
-court--appointed monitor entrusted
with the company’s finances. °
:” Those creditors are owed $12.6 mil-
rion from loans made to buy Hawkair’ s
‘three aircraft,
‘Their co-operation is crucial if the
‘company is to successfully come out
‘from behind creditor protection, says

‘David Gray from Campbell, Saunders _
» Service provider began’ withholding |

: Lid. of Vancouver.
: “My sense is that so far, by: and
tlarge, the creditors aren't reacting very
‘tnegatively,” said Gray late last week.
The problem .with’ the financing —
‘deals with IMP Group Lid. and Field
t Aviation is that they call for payments
;on aircraft that-aren’t worth. what they
: were when the arrangements were first
made, he said.

aoverve

“That’s something that obviously

sneeds to be dealt with,” Gray added of

: the aircraft market value now estimated

fat just $7.5 million.

; The original plan was to pay IMP
‘and Field $223,141 a month but acom-
‘bination of higher: fuel prices, higher
‘ operating costs elsewhere and a squeeze
: on ticket rates have cut Hawkair’s cash
» flow.

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It missed making payments in June
and even though-lower payments were _
then negoitiated, down to $125.875 a
month, and a payment holiday was
granted, the company missed again on

- amounts due Oct. 1. Hawkair was giv-
en creditor protection Oct. 7 to forestall

any of its creditors from taking legal
action of their own to collect monies
owing.

Aside from the aircraft payments,
the company’s cash flow was further
reduced when its main Visa credit card’

$75,000 in company reccivables..

In addition. Hawkair owed an esti-
mated $2.3 million to a variety of other
companies as of the end of September.

“On a balance sheet basis, the, to-

“tal value of Hawkair’s tangible assets

is-less than the amount of its total li-
abilities,” read documents filed with
the court:

“In a liquidation scenario, the asset

value would be much lower than book | ~

value and, accordingly, it is.expected
that Hawkair’s aircraft financiers would
suffer large shortfalls and’ recoveries
for unsecured creditors in a liquidation |

- scenario would be nominat at best,” the

documents continue.
Those same documents sketch a pic-

“ture of a company that lost $1.2 million

. Q.
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-in 2003 but then managed to cut that to.

a $276,000 loss’in 2004.

But rising fuel and insurance and
other costs this year put the company:
into a $348,000 loss position by June
30 of this year.

It did begin to: scale back routes. |
fired employees and cut operating ex-
penses beginning inthe summer,

Gray said his company and Hawkair

will be back in court Nov. 4 where an

updated financial report will be given.
Hawkair won't be ready to make a
proposal on that date to its creditors
in terms of how much companies and
people can expect, but there will be a

clearer idea of how the airline i is doing. .

said Gray.

'_ “In cases like this you can get some

angry phone calls from creditors, but

] haven’ t been getting any about this :

one,” he said.

“py m hopeful that Hawkair can come
out of this,” Gray continued.
‘SEER

lumbia judge who granted Hawkair
creditor: protection is Madam Justice
Brenda Brown. 7

She’s the justice who first froze the.
assets of the B.C. Teachers’ Federation
and then hit it with a $500,000 fine last
week for its illegal strike.

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