–Barbados, St. Vincent not buying
PRIME Minister of Antigua and Barbuda, Gaston Browne is pushing hard for the re-organisation over liquidation of regional airliner, LIAT, and last Saturday released a re-organisation plan that calls for the injection of US$40M in new equity.
The plan notes that the Antigua and Barbuda Government is willing to foot up to 50 per cent of the equity, and further argues that re-organisation over liquidation would benefit creditors who could end up with as little as less than 10 per cent in the event of liquidation.
In the re-organisation plan, outside of secured creditors, creditors would still end up with less than they are owed, however, the agreement with creditors would guarantee them no less than they would’ve received had the company been liquidated.
Submitted by the Antigua and Barbuda Government, the proposal seeks to preserve shareholders value; protect the airline; and enhance regional integration.
The reorganisation plan argues that “liquidation…would dispose of the company’s assets for a fraction of its value, resulting in greater losses to stakeholders, including creditor.” It was noted, too, that some $100M worth of the company’s assets are unlikely to yield more than 15 cents in the dollar ($15M), after realisation costs, resulting in a loss value of $85M.
“The $15M realisable value from the piecemeal liquidation would result in payments of creditors of less than 10 per cent of their outstanding liabilities. [It] would leave all other creditors, including employees, in an invidious position, compared to reorganisation with a superior lead. The proposed reorganisation and recapitalisation of LIAT would result in an injection of new equity that would cover at least 50 percent of the outstanding staff liabilities,” the report said.
The report did not state what currency the values are being listed in.
LIAT’s debt currently totals over US$100M, some US$11M of which is owed to passengers, and another over US$80M being owed to staff.
PARTICULARLY HARD-HIT
Due to year-on-year successive losses, the airline was particularly hard hit by the recent COVID-19 pandemic which effected severe travel restrictions and mass airport closures around the world.
However, even before the COVID-19 situation hit, the airline had been having successive years of financial difficulties, operating at a loss. In 2019, that loss amounted to US$4.44M. Hence, while most airlines are being hard hit by the COVID-19 situation and restrictions on travel, LIAT is drowning.
Browne, however, believes it is not too late to revive the company, if prudent cost-cutting measures are taken and the US$40M is injected.
“The balance sheet would be strengthened with the injection of $108M in new equity, of which the Antigua and Barbuda Government is prepared to underwrite up to 50 per cent. Of the new capital, $45M will be used to repay staff costs.
Though the proposal seeks to address monies owed to staff and other creditors, it said nothing about how the re-organisation would address monies owed to customers.
Scores of Guyanese and other Caribbean nationals are up in arms, wondering if they will ever again see the money they handed over to the failed regional airline, LIAT, for flights that never took off. Notwithstanding continuing to call for a refund of their money, thus far the company has only been offering customers credit, notwithstanding possible liquidation plans.
Browne is expected to meet today with Prime Minister of St. Vincent and the Grenadines, Dr. Ralph Gonsalves, and Barbados’ Prime Minister Mia Mottley to discuss the fate of the Eastern Caribbean airliner, however, the two governments have already indicated their non-support for the plan.
Antigua, along with the governments of St. Vincent, Barbados and Dominica are the largest shareholders of the airline.
According to the report, “If the existing shareholder governments are not interested in investing in the reorganised LIAT, they will be requested to surrender their shares for $1, which is a superior offer to what they would get at liquidation.”
The report points out that prior to the COVID-19 situation, shareholder governments had agreed to a December 2019 restructuring plan for the company, which had called for a cash injection of US$35M.
Browne, however, is advocating as best he can to save the airline.
“LIAT is dying; some have prescribed corporate euthanasia. Antigua and Barbuda, a nation of courageous and resilient people, recommends re-organisation,” Browne said in a Facebook post on Sunday.
Browne credits the airline, which is headquartered in Antigua, with being a part of the Caribbean landscape, and says its liquidation will be a travesty.
“LIAT is a Caribbean Institution; the pride of the Caribbean people… It has served well the Caribbean Community, shareholder governments, and the cause of regional integration, and it can continue to do so provided it is reorganised,” he said.
He blames the collapsing state of the airline on the lack of support from the Caribbean nations.
“It is those who undermined LIAT by encouraging transient profit-seekers in competition that failed the airline. LIAT’s challenges, including its operating losses, derived from its continuous battles to maintain aviation stability and sustainability for the Caribbean people against opportunistic rivals, who abandoned the area when their ambitions to profit from it,” Gaston declared.
“Caribbean governments are willing to spend tens of millions of dollars to subsidize foreign carriers but expects LIAT to operate their unprofitable routes without financial support. The new LIAT would bring this inequity to an end and would only operate those routes with a supporting MRG,” he added.
