Air Georgian, the Proposal to Purchase: What is the motivation?
Kirk Watson
Valued Professional Contract Services for Aircraft Owners, Buyers, Sellers,Airlines, Lessors/Lessees, Lenders & Industry Partners
Air Georgian, the Proposal to Purchase: What is the motivation?
Author: Kirk Watson 3 April 2020 (Note: All facts are from sources in the public domain and are sourced with hyper-links)
Please find the link below as an update article that brings us up to date to April 17, 2020. Recommend reading this and then going over to the update.
https://www.dhirubhai.net/pulse/what-do-two-gentlemen-know-rest-world-doesnt-kirk-watson
DISCUSSION (3 April 2020)
By early 2015, R1 Airlines FIFO oil related business had evaporated due to the oil crash in 2014. In Feb 2015, Binder acted to retake operational management of Regional 1 Airlines, and later extracted R1 Airlines from REAL. Binder maintained his joint ownership of REAL (Air Georgian). Source: https://www.skiesmag.com/press-releases/avmaxgroupcompletesletterofintenttoreacquireregional1airline/
Regional 1 Airlines AOC is suspended and as April 8, 2020, the suspension if not lifted will normally move to status: cancelled
https://otc-cta.gc.ca/eng/ruling/2019-a-52
In Feb 2019, Air Canada advised Air Georgian that the Tier III Commercial Agreement (known as a CPA) between them would be terminated in 4Q19. The cancellation of the contract was documented in the “Termination Agreement” (an addendum to the Commercial Agreement) between Air Canada and AGL. The Termination Agreement was executed in 2Q2019. The termination date was later extended to Jan 31, 2020.
The Air Canada CPA contract defined AGL. What may have factored into the decision by AGL owners to subsidize the airlines operations over several years?
Both owners benefited via leasing aircraft to AGL. Subsidizing AGL protected their lease rents (B1900 and CRJ), and allowed the company to remain solvent hoping for sunnier days ahead. It’s also typical for these assets to be appraised at the high end of the value range, then leverage for secured debt which allows for batter balance sheets and extraction of cash for deployment in other investments. Market values can be maintained at the high end with lease revenue stream. So avoiding write-downs on the aircraft NBV is another motivator.
AIR GEORGIAN SHAREHOLDERS / OWNERS
AGL’s sole shareholder is Regional Express Aviation Limited (“REAL”), a holding company owned jointly (50/50) by 1775526 Alberta Ltd. (formerly Avmax Air Inc.-John Binder) and Georgian Aircraft Corp. ( Board members: James (Jamie) Massie, Daniel Revell: CFO of Georgian International) (both owners known as the “Shareholders”). Georgian International Ltd states this:
Massie co-founded Air Georgian and was the sole party managing the airline until 2013. R1 Airlines (Binder) and Air Georgian (Massie) announced a joint venture on 12 Sept 2013 with Edmundson being appointed to President and CEO of REAL. REAL was based in Calgary where accounting services for REAL were provided by Avmax Group . Regional 1 Airlines was rebranded to R1 Airlines and its operational aspects put into the care of Edmondson as CEO.
Source: https://www.skiesmag.com/press-releases/air-georgian-and-regional-1-complete-joint-venture/
Around the same time (Dec2013), Air Canada awarded Air Georgian CRJ100/200 routes (pulled from Jazz) under a CPA in addition to the B1900’s already being operated. Avmax Aircraft Leasing Inc (part of Avmax Group Inc) leased six ex-Air Canada CRJ100/200 aircraft to Air Georgian and in 2015 Air Canada moved more CRJ’s into Air Georgian aiming to more than double Air Georgian’s CRJ fleet with indications of more after that.
https://www.skiesmag.com/news/theneedforfeed/
Creditor Claims: $44,684,818
Based on the creditors list, the two owners of REAL were heavily subsidizing Air Georgian. The record shows;
SHAREHOLDERS CLAIMS
Avmax Holdings Inc.- $13,786,808
2229275 Alberta Ltd – $5,304,480 (ATB Financial secured debt assumed by 2229275 Alberta Ltd. Jan 2020)
Regional 1 Airlines-$101,464
Georgian Aircraft Corp - $9,012,784
Georgian Aircraft Corp-“USD” $306,729
Georgian Chevrolet Buick GMC INC- $4,276
Total shareholder Subsidy(direct and indirect): $23.7 million
AIR CANADA CLAIMS
Air Canada Winnipeg: $1,020,671
Air Canada Capital Ltd- $2,227,995
Air Canada Cargo- $11,583
Air Canada Lease:$1,385,467
Air Canada Occupational Health-$1,255
Total Air Canada: $4,646,971
“Other” Unsecured Creditors: Approx. $16,300,000
The Amended Creditor list with details can be found here;
https://home.kpmg/content/dam/kpmg/ca/pdf/creditorlinks/air-georgian/creditor-package-amended.pdf
Air Georgian Ltd– AGL –Operated the aircraft related to the CPA. Owned by REAL.
REAL- a holding company owned jointly by 1775526 Alberta Ltd. (formerly Avmax Air Inc) and Georgian Aircraft Corp.
1775526 Alberta Ltd.- owned by Binder, related to Binder Capital. 1775526 is the joint owner of REAL.
Binder Capital Corporation- A Binder related company related to Avmax Holdings Inc. and related to the Sunward share purchase. See Note 1.
Avmax Holdings Inc.- A Binder related company related to Binder Capital Corp and related to the share purchase agreement to transfer ownership of Avmax Group Inc to Sunward Intelligent Equipment. See Note 1.
Avmax Group Inc.- The holding company at the focus of the Binder share sale to Sunward Intelligent Equipment Co., Ltd. It is unclear as to who controls this company today. If Sunward now owns 100% of shares, it does not necessarily mean Sunward is free from outstanding obligations to Binder.
Sunward Intelligent Equipment Co., Ltd. – The Sunward Group is headquartered in Changsha City, China. Sunward is the Buyer of Avmax Group Inc. See Note 2
Georgian Aircraft Corp.- owned by Georgian International Ltd. Joint owner of REAL.
Georgian International Ltd- co-owned by Massie (President and CEO) with Devos as Chairman). A related website states Devos is partner with Georgian Automotive Group. DeVos is Chairman and CEO of DP Fox Ventures LLC.
https://www.dpfox.com/our-company/our-team/daniel-g-devos/
2229275 Alberta Ltd. (222)- Binder related company associated with Binder’s son Cam Binder. DIP Lender to AGL. Court approved “222” loan up to $2,000,000. to AGL during after 31 Jan 2020 and prior to 17 Apr 2020. Interest Rate: 12%. As DIP lender, this loan is secured as next priority after proposal trustee KPMG, administration charge of $200,000.
2229275 Alberta Ltd. (222)- related to Binder. Has a creditor claim of $5,304,480. This “outstanding secured debt” was assigned by ATB Financial to 222 with all of its right, title and interest via the “222 Assignment Agreement” dated 24 January 2020.
27469304 Ontario Inc. - the Buyer of AGL. Related to Binder Capital , Avmax Holdings, and Binder. Binder Capital CFO is listed as companies POC.
Note 1: https://www.dentons.com/en/stephanie-campbell
“Binder Capital Corporation / Avmax Holdings Inc.: Advising this Calgary-based international aviation product and service company in respect of its sale of Avmax Group Inc. to Sunward Intelligent Equipment, a Shenzhen-listed Chinese construction equipment manufacturer. The transaction value has not been disclosed; however, Sunward has publicly announced that they will be raising CNY 2.2 billion (US$347.24 million) to fund the acquisition.”
Note 2: Source: https://www.avmax.com/2016/avmax-announces-execution-of-share-purchase-agreement-with-sunward/
Avmax Announces Execution Of Share Purchase Agreement With Sunward
“January 12, 2016 – Calgary, Alberta – Avmax Group Inc. (“Avmax”) is pleased to announce that its parent corporation Avmax Holdings Inc. (“AHI”) has entered into a share purchase agreement dated January 8, 2016 (the “Agreement”) with Sunward Intelligent Equipment Co., Ltd. (“Sunward”) and Binder Capital Corp. (“BCC”). Sunward is a corporation existing under the laws of the People’s Republic of China and is listed on Shenzhen Stock Exchange (stock code: 002097).
Sunward will acquire a majority interest in Avmax during the spring of 2016, and will acquire additional portions of Avmax shares annually over the next 3 to 4 years at which time Sunward will own 100%. “
Note 3: https://www.wingsmagazine.com/avmax-joins-forces-with-chinas-sunward-13087/
https://www.skiesmag.com/press-releases/avmax-group-announces-execution-of-share-purchase-agreement/
“Under the terms of the Agreement, Sunward will acquire: 60% of the issued and outstanding shares of Avmax held by AHI during the Spring of 2016 (the 2015 Purchase); 13.33% of the issued and outstanding shares of Avmax held by AHI during the Spring of 2017 (the 2016 purchase); 13.33% of the issued and outstanding shares of Avmax held by AHI during the Spring of 2018 (the 2017 purchase); and (i 13.33% of the issued and outstanding shares of Avmax held by AHI during the Spring of 2019 (the 2018 purchase). Sunward will own 100% of the issued and outstanding shares of Avmax at the conclusion of the Transaction in 2019.”
Owner, Airstart
4 年What a fascinating article. Thanks Kirk