Silver Airways is a financially troubled regional airline serving Florida, the Bahamas and the Caribbean, and was about to sell it at a bankruptcy auction last week.
However, no bidders objected to the so-called “stalker horse” offer at the auction on May 28th. The airline is currently working to fill the sale of all assets into private equity groups, its chief executive said in a court filed Wednesday.
U.S. bankruptcy judge Peter Rassin lighted up the auction last month after voting for the major creditor of the Hollywood-based airline.
However, CEO, president and general advisor Stephen Rossom declared in a six-page affidavit that despite expressions of interest from a wide range of potential bidders, he failed to move forward with an offer better than a $5.775 million bid from an acquisition company affiliated with Wexford Capital of Greenwitch, Connecticut.
Silver said in a court application published Wednesday that the company is also working on a deal that will allow the acquisition company Argentum Acquisitions Co. LLC to acquire Seabourne Airlines’ U.S. Virgin Islands affiliates, which serves St. Thomas and St. Croix. Both airlines filed for Chapter 11 Bankruptcy Protection on December 30, 2024. Rossum oversees both careers and continues to fly between their respective bankruptcy cases.
Under this agreement, Argentum will receive all of the Silver “aircraft and related equipment, ground support infrastructure, airport gate leases, maintenance and operational facilities, accounts receivable and intellectual property,” according to Rossum’s affidavit.
Upon Silver’s request, the judge continued hearings on approval of the Argentum transaction until June 10th. At a Wednesday afternoon hearing, Silver’s attorney Brian Hall notified the court that the company received a new bid for Seaborn Affiliate shortly after lunch. Hall did not identify bidders or say how happy the buyers would pay for a small Caribbean airline that operates a single seaplane.
More urgent is the speed at which Argentum’s purchase agreement ends. Hall has revealed to the court that it had worsened the thin cash flow situation for the dog just before the busy anniversary weekend when the airline was forced to temporarily suspend flights due to safety-related maintenance issues. The episode, held May 28-29, cost the company $1 million as a result of the flight cancellation, Hall reported.
According to court filings by Hall, Silver and Argentum’s attorneys are working towards a “transition service agreement” required by Argentum. The transaction also requires Federal Aviation Administration approval and can take up to 60 days. The technology is resolved, but Silver and Seaborn will continue to operate under bankruptcy court oversight.
There are no many interests, no competing offers
Rossum in the affidavit said that multiple parties are interested in acquiring both airlines as packages or individually. But in the end, they all took the pass despite active marketing efforts by his management group.
“The deadline for bidding on Silver’s assets prevented qualifying bids and no auctions were held,” Rossum said in his affidavit.
“Our management contacted and submitted marketing materials to more than 75 potential acquirers and financial parties, of which approximately 25 people implemented non-disclosure agreements and requested further marketing materials and financial information,” writes Rossum.
“The parties who expressed interest in the debtor were airlines (both domestic and international cargo and passengers), private corporations, aviation entrepreneurs, including executives from former airlines, and other financial partners specializing in struggling assets,” he said.
At least eight parties have provided written expressions of interest, saying, “more than six provide expressions of interest in Seaborne assets, four of which indicate that they will purchase both airlines.”
“In my opinion and business judgment, the BID procedure was provided to a neat and competitive process where stakeholders could submit bids to purchase Silver’s assets,” he added in an affidavit in favour of Argentum Bid’s court approval. “The bidding process and sales process allowed the debtor to test the value of the assets and fully exposed the assets to the market.”
The failure to create a bid contest represents another dagger for an airline with a history of economic problems.
Turbulent ride comfort
Silver’s business has been declining since applying for Chapter 11 in December. Silver currently serves five Florida cities, including Tampa, Key West, Tallahassee and Pensacola, from the Fort Lauderdale Hollywood International Airport hub. It also serves 11 destinations in the Bahamas and Caribbean.
The silver fleet has been reduced from 16 to eight turboprop ATR aircraft. Its employee list had fallen from over 600 as of April 30 to 387 flight crews and ground workers, according to court records.
Silver has been filed in Chapter 11 with over $400 million paid to secured unsecured creditors, including major lenders, airports, tax collectors, aircraft leasing companies and major fuel companies. For more than three months after the application, the airline struggled to raise and maintain cash, relied on Brigade Agency Services, the key secured creditor, which delayed payments and supported multiple interim requests to reduce cash collateral for its business. But that was still not enough to maintain Silver’s daily operations during bankruptcy.
In April, Wexford affiliate Kia II LLC stepped in to provide a significant debtor funding of $5.5 million. At the same time, another Wexford affiliate, Argentum, offered the “stalker horse” to buy the silver in full for $5.775 million.
Judge Rasin initially hesitated to allow the auction to move forward.
“It has not been lost in court that debtors collectively borrowed hundreds of millions of dollars, but now totalling less than $10 million,” Rasin wrote in an order approving the auction.
“But this record reflects something more. Information and explicit support for almost every key manager’s claimant and prospects is far from guaranteeing that competitive bids on Silver Airways assets and the sale of Seaborne assets could result in meaningful payments,” the judge said.
