Pemco World Air Services Files Bankruptcy, Intending to Sell Aircraft Maintenance and Conversion Business
On March 5, 2012, Pemco World Air Services ("Pemco"), filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to the Declaration of Pemco's CFO (the "Declaration"), Pemco describes itself as "an industry leader in maintenance, repair and overhaul for wide and narrow body aircraft and regional jets from around the world." Decl. at *2. In addition to maintenance and repair, Pemco also is one of the leading providers of narrow body aircraft cargo conversions. Id.
Pemco's Business Operations
Pemco provides its maintenance and overall services out of three service facilities located in Tampa, Florida; Dothan, Alabama; and Erlanger Kentucky. At its service facilities, the company provides customers with scheduled and unscheduled maintenance, interior refurbishment, interior and equipment installations as well as equipment repair and upgrades. Decl. at *3. Going in to bankruptcy, Pemco has 877 employees, approximately 25% of which are represented by the International Association of Machinists and Aerospace Workers AFL-CIO Local 1632. Id.
At the time of its filing for bankruptcy, Pemco has approximately $31.8 million in senior secured debt which is held by Avion Services Holdings, LLC ("Avion"). Avion is an affiliate of Sun Aviation. Sun Aviation is a secured noteholder of Pemco, holding $5.6 million in subordinated secured notes. Decl. at *4.
Objectives While in Bankruptcy
Pemco lists several factors that it attributes to the need to file for bankruptcy. Since 9/11, the airline industry as a whole has been confronted with increased fuel and security costs. These increased costs have forced airlines to reduce airplane overhauls and conversions, which in turn have hurt Pemco's revenues. Decl. at *4-5. In response to these challenges, Pemco was able to reduce some of its operating costs, however, it ultimately was unable to generate enough cash flow to satisfy its debt obligations.
Now that the Pemco has filed for bankruptcy, the company intends to sell off its aircraft maintenance and conversion business through a bankruptcy auction. As for any assets that remain after the auction, Pemco intends to liquidate under the Bankruptcy Code. The Pemco bankruptcy proceeding is before Judge Peter J. Walsh. Judge Walsh previously served as the Chief Judge of the Delaware Bankruptcy Court. Pemco is represented by the law firm Young, Conaway, Stargatt & Taylor.
For readers interested in more information on bankruptcy auctions, click here to read a prior post titled "A Closer Look at Bankruptcy Auctions."
Jason Cornell is a bankruptcy attorney with the law firm Fox Rothschild LLP. Jason is admitted and practices before the United States Bankruptcy Court for the District of Delaware and the United States Bankruptcy Court for the Southern District of Florida. You can reach Jason at (561) 804-4415, or email@example.com.