Western Global Airlines (KD, Fort Myers Southwest Florida) is expected to file for US Chapter 11 bankruptcy protection this week after reaching a deal with creditors and lenders to keep operating, according to Bloomberg.
The report states that the Florida-based cargo airline has secured funding of USD77.3 million, albeit at 9% over the secured overnight financing rate, to keep the carrier flying while under creditor protection. The current secured overnight financing rate is 5.31%
Debt held by founder and CEO James (Jim) Neff will be rolled up and other creditors, including bondholders, will provide about 50% of the financing. Notably, the deal will see Neff retain control of Western Global Airlines after it exits Chapter 11. A spokesperson for Western Global Airlines says there has been no announcement on the matter and the current reporting is "rumor-based."
Western Global Airlines has been the subject of intense speculation recently. Global demand for air freight has declined since pandemic highs, and the carrier's fleet of two B747-400(BCF)s, one B747-400(BDSF), one B747-400FSCD, and sixteen MD-11Fs are old and expensive to fly. Only five of the 20 aircraft, said to be worth a combined USD222 million, are active. In June, ch-aviation reported that the airline was mulling several options with creditors, including bankruptcy.
Shortly after, reports became public about Neff acquiring USD115 million of senior secured debt in the airline from Truist Financial Group, at USD0.40 in the dollar. This move reportedly angered some unsecured creditors who are now further down the queue in the event of any business liquidation.
In late July, a statement issued by Western Global Airlines said Neff and senior management were committed to acting in the airline's and its stakeholders' best interests. "After ten years of profitable operations and successful growth, the company is currently navigating financial challenges driven by unforeseen industry-wide factors... Western Global Airlines is working diligently with its advisors to explore all value-maximising alternatives and take the steps necessary to address its financial position."
