Insel Air on the verge of bankruptcy
PHILIPSBURG – Troubled airline Insel Air came one step closer to bankruptcy this week after the Court in First Instance withheld its approval of the so-called homologation agreement with its creditors. Intercaribbean, the Turks and Caicos-based airline that is willing to extend a credit of more than $11 million in exchange for the Insel Air shares has so far not satisfied the court with a solid guarantee that it will indeed makes these funds available. Intercaribbean, founded by Lyndon Gardiner in 1991, considers appealing the court ruling.
The creditors reached an agreement with Insel Air in December of last year. Two-third of the creditors voted in favor of the agreement the airline offered. These creditors represented more than 75 percent of the airlines outstanding debts of 133 million guilders ($74.3 million). Under the agreement, 854 creditors would be paid in full.
Intercaribbean said in December that it would make the $11 million available to satisfy the creditors, but the court demanded that the company presents a guarantee before January 15, 2019 that it will indeed honor this agreement. The court demanded a guarantee that all 1,280 creditors will receive 3,000 guilders ($1,675).
The December court ruling furthermore states that Intercaribbean risks a penalty of $500,000 if it does not present its guarantee.
The attorney for Intercaribbean submitted a mortgage deed (on an airplane) to the court and statements from Meridian Financial Group and Enterprise Bank Trust that they are prepared to extend credit to Intercaribbean.
The court ruled last week that the mortgage deed on the plane would have been sufficient as a guarantee. However, a condition for extending the mortgage was that the sales and purchase agreement be signed by April 15, 2019. The court suggested some amendments to the mortgage deed to overcome this obstacle, but Intercaribbean declined. Therefore, the court considers the guarantee as insufficient.
Insel Air trustee Rogier van den Heuvel asked the court not to declare the airline’s bankruptcy immediately because Intercaribbean considers appealing the ruling.
Insel Air’s financial troubles first surfaced in 2016. In his first report about the situation at the airline, the trustee reports three causes: too much staff (567), a loss-making maintenance department, insufficient financial management and pre-financing of flights to Venezuela to the tune of $67 million.
The government of Curacao extended a bridge loan of $18 million to support Insel Air. In 2015, the company still recorded a modest profit of 3 million guilders ($1.67 million), but the next year passenger volume dropped dramatically because there were no more flights to Venezuela. It resulted in a loss of 40.2 million ($22.45 million).
The company’s debts are astronomical: 1.8 million guilders (around $1 million) to customs, 20.9 million ($11.6 million) to the tax inspectorate in Curacao, 15.1 million guilders ($8.4 million) to Social Insurance Bank SVB and 2 million guilders ($1.1 million) arrears in pension premiums. Insel Air owed common creditors another 150 million guilders ($83.3 million) at the time of the first trustee report in 2017.
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