Sun Country Airlines, aggressive to survive a banknote squeeze, filed for defalcation aegis Monday in a move that afar itself from its majority stockholder, Tom Petters, whose added businesses accept been taken over by a cloister appointee as allotment of a massive artifice case.
“We’re not in defalcation because of our business archetypal actuality broken,” Stan Gadek, Sun Country’s CEO, said in an interview. “We are in defalcation because of the contempo contest at Petters Group Worldwide.”
Gadek had been counting on an operating accommodation from Petters, who owns all the voting shares of Sun Country, to advice the low-fare carrier pay its bills during the months of October and November, commonly ablaze aerial months.
Instead, Petters’ home and address were raided by federal agents Sept. 24, and he was confined Friday.
Gadek said the accommodation to book for defalcation was fabricated over the weekend, because Sun Country did not appetite to be beneath the advocacy of a cloister receiver. Advocate Doug Kelley was appointed the Petters’ receiver by a federal adjudicator Monday, and he will booty ascendancy of the assets of Petters’ companies. But because of the filing, in U.S. Defalcation Cloister in Minnesota, Sun Country will be absolved from that cloister action.
“Controlling their own afterlife is bigger than actuality sucked into the amphitheater of all of the issues of the Petters organization,” said Ralph Strangis, a Minneapolis advocate who has served on airline boards.
Gadek said that Sun Country has been “whipsawed by circadian revelations and account stories” about the advance acknowledged case adjoin Petters and his associates, who are accused of ambidexterity investors of added than $3 billion.
The Mendota Heights carrier employs about 850 and operates 30 flights a day. In bankruptcy, the carrier affairs to fly its accustomed schedule. It’s the No. 2 carrier in the Twin Cities, area 663,000 bodies boarded Sun Country flights during the 12 months catastrophe in June. The airline is gearing up for about 40 circadian flights during its aiguille season, back abounding Minnesotans abscond winter to hot spots in Mexico.
Terry Trippler, a Minneapolis-based airline expert, said that Sun Country’s defalcation “will be no different” than what consumers saw back Northwest was in bankruptcy.
“Your tickets are still good. You can still book with confidence,” Trippler said.
The airline has emphasized that back consumers allegation tickets on Sun Country, acclaim agenda companies accumulate chump payments until afterwards the flights are operated. So, a customer will either fly or get a refund.
Sun Country, founded in 1982, has been through defalcation before. The airline about went beneath in backward 2001 and was affected into defalcation by creditors, but emerged months after with new owners.
Petters and Whitebox Advisors, a Twin Cities barrier fund, acquired Sun Country in backward 2006. Petters bought out the Whitebox pale a year later.
Andy Redleaf, who leads Whitebox, and his Sun Minnesota backing were listed as the better apart creditor in the Sun Country defalcation at $12.5 million. Redleaf could not be accomplished Monday for comment.
Sun Country had a abbreviate banknote beanbag of $2.3 actor at the end of June, and its accepted banknote antithesis wasn’t accessible Monday. By activity into defalcation court, the carrier will be able to get some abatement on authoritative payments to vendors.
Today, Sun Country’s advisers will get paid, but their checks will be 50 percent smaller. To bottle cash, Gadek afresh absitively to cut employees’ pay in bisected and apprenticed to balance workers — with absorption — in 2009.
Joe Battaglia, a Teamsters official, said that he will book a affliction today on account of Sun Country flight associates because administration cut pay after negotiations.
Buddy Scroggins, pilots’ abutment chairman, said he hopes the airline uses defalcation “to advance the banking accountability added appropriately amid all its creditors instead of relying primarily on sacrifices from employees.”
In contempo years, Sun Country was assisting in the aboriginal quarter. But for the four abode catastrophe in June, Sun Country absent $47 actor on operating acquirement of $251 million.
During Chapter 11, Gadek said he expects new owners to accommodate new capital, abacus that he wants to accord advisers shares in the airline. “They’ve sacrificed for a continued time here,” Gadek said. “I anticipate it’s aerial time they get a chance” to account from approaching success.
Since his accession in March, Gadek, a above Northwest and AirTran executive, has bargain costs and begin new sources of revenue, including aggressive charters and new fees.
Julius Maldutis, a New York aerodynamics consultant, said: “If it wasn’t for Stan Gadek, this affair would be shut bottomward already.”
Trippler charcoal optimistic that Sun Country will survive. He said, “Once they hit Christmas, the banknote breeze is excellent. They accept a abundant winter advanced of them.”
Liz Fedor • 612-673-7709
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