Trustee Gerald McHale has ordered PenAir (Anchorage Ted Stevens) to expedite the sale of its assets to an investor in order to avoid a shutdown, KUCB radio has reported. The airline will auction its assets on October 3, 2018.
McHale issued the order due to the "rapidly" deteriorating cash position of the airline, although he added that he did not foresee an insolvency risk prior to November 2018.
PenAir filed for Chapter 11 bankruptcy protection in August 2017 and currently owes around USD10 million to some 200 creditors, including the State of Alaska and Alaska Airlines (AS, Seattle Tacoma International). Since filing for protection, PenAir has taken out USD4.5 million in fresh loans.
According to KTUU, Connecticut-based hedge fund Wexford Capital, one of PenAir's major creditors, has already been identified as a prospective bidder. The fund is currently looking at the airline's finances and has been recognised by the court as a potential buyer of all or some assets of the airline.
Alaska Airlines is also reported to be evaluating an acquisition.
The sale will be conducted under the section 363 of the US Bankruptcy Code, which means that all assets will be sold free of any liens, claims, and encumbrances. The existing unsecured liabilities will most likely not be repaid.
PenAir is expected to continue regional operations out of Anchorage Ted Stevens until the sale. The airline will not be liquidated subject to finding a new investor and will likely continue the current pattern of service after October 2018.
