From June 3
Quote:
While none of the parties are entirely pleased with settlement terms for the Evergreen Vintage Aircraft bankruptcy case, Umpqua Bank has reason to be the most satisfied after a hearing last week.
A settlement and sale of EVA’s assets was approved before the bankruptcy court, with the vast majority of the proceeds guaranteed to go to the bank and the recipients of the remaining funds still negotiating their cut.
One of those recipients is creditor World Fuel Services Inc., whose claim stems from a 2012 agreement by EVA to guarantee debt owed by parent company Evergreen International Airlines. At the time that debt totaled $7 million but has grown to more than $11 million. To ensure repayment EVA granted World Fuel security interest in two aircraft, a DeHavilland DH4M1 and a Douglas A-2B Invader.
The bankruptcy settlement dictates that the Invader will be handed over to World Fuel free and clear, as it has what is described in court filings as a “valid and unavoidable lien” on the plane.
But the settlement calls for the sale of the DeHavilland, the value of which EVA and World Fuel disagree on.
When World Fuel was granted security interest in the plane in 2012, the DeHavilland was appraised at $2 million in value. A more recent appraisal ordered by EVA, however, set the value at $700,000. World Fuel sought last week to prove the former value was still accurate and hoped to have the original appraiser at the hearing to testify, but that appraiser was unable to attend the hearing.
World Fuel asked to have the hearing postponed, but Judge Randall Dunn denied the request for several reasons, including that it was filed too late (just one day prior) and that, as Umpqua Bank attorney Joseph Sakay argued, any postponement is damaging in this case — a final evidentiary hearing for Umpqua Bank’s original December request for a relief from the stay put on foreclosure by EVA’s bankruptcy is still scheduled for June 11, and time is of the essence if the current settlement is to work out.
“Right now we are trying to set up escrow, we can’t set up escrow because of the delay,” he said.
But although Dunn denied the postponement that could have proven a higher appraisal value, he took the two appraisals of the DeHavilland and split the difference, giving the plane a court-recognized value of up to $1.35 million. This valuation, Dunn said, gives World Fuel the benefit of the doubt, as the $2 million appraised value is three years old and “market values change over time.”
In the proposed $22 million settlement, $1.5 million was set aside as a “holdback” that could go toward paying off various costs, including administrative expenses and other claims, including one by Yamhill County. That $1.5 million is also proposed to cover any payments to World Fuel for its DeHavilland, so the $1.35 million valuation has the advantage for the settlement of being within that maximum allotted amount.
However, raising the recognized value from $700,000 to up to $1.35 million presents a new potential problem. Yamhill County, which is owed nearly $500,000 by EVA for back taxes, has stated it does not object to the settlement as long as it is paid that amount in full, which is also proposed to come out of the holdback amount.
“When we do the math in terms of the $1.5 million (holdback), that will reduce the $1.5 million to something above $1 million,” said Justin Leonard, attorney for the Evergreen Aviation and Space Museum.
So, with the raised potential value of the DeHavilland, a problem arises as there might not be enough to cover both World Fuel and the county’s claims, meaning the county could reopen its objection which was resolved at a hearing the prior week.
Dunn responded that some minor adjustments may need to be made to the county’s claim and that he was prepared to deal with that potential problem at a future date.
“The bank is gonna get its 20.5 million smackers on closing, and what happens to the rest, we’ll see,” Dunn said, adding that the bank is not just getting the most money randomly but because it had the largest claim, nearly $50 million, against EVA. “This hearing was never set up as a definitive valuation of the aircraft, it was set up for approval of the settlement.”
In light of Umpqua Bank’s former attempt to sell EVA’s planes for far less than the current proposed settlement amount, EVA attorney Nicholas Henderson stated that the debtor is satisfied with the current deal.
“Looking at the complex issues and the expense that would be attendant in resolving those issues, the debtor has determined that the current settlement and sale for $22 million to resolve over $200 million worth of claims is in the best interest of the debtor,” Henderson said, asking that the court approve the sale.
Dunn stated he is prepared to approve the settlement and sale as is now proposed. While the bank will get the $20.5 million, the finer details of the $1.5 million holdback will continue to be worked out.
Dunn stated that World Fuel could seek to get another appraisal of the aircraft to narrow the value down, provided it did so in a timely manner, and that the company might want to “else something highly unfortunate might happen to it.” Still, the $1.5 million holdback is set in stone following the settlement’s approval, meaning either World Fuel or Yamhill County will likely have to concede some amount from their claim.
Attorney James Laurick stated World Fuel will work up a new appraisal, which will be presented at a hearing on valuation of the DeHavilland scheduled for June 11. At that time the final hearing on Umpqua’s original request for relief from stay will also be held, which is all but dismissed given the court’s approval of the $22 million global settlement.
http://www.pamplinmedia.com/nbg/142-new ... t-approved
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