Sun Country files plan to exit bankruptcy
- Article by: SUZANNE ZIEGLER
- Star Tribune
- April 5, 2010 - 11:06 PM
Without a buyer in the wings, Sun Country Airlines took a significant step toward emerging from bankruptcy by filing a reorganization plan Monday in which its major creditors -- including current owner Petters Aviation -- become shareholders.
The document, filed in U.S. Bankruptcy Court, indicated the air carrier is rebounding financially: After losses of nearly half a million each in 2007 and 2008, the low-fare carrier said it made $1.4 million on $202 million in revenue in 2009. And it has made $1.9 million in the first two months of 2010 on total revenue of nearly $40 million.
"It's a big turnaround. I would attribute it to the fact that they are no longer giving away their seats," said Minneapolis travel expert Terry Trippler. "Their pricing is a lot sharper than it has been in the past. They have the right product at the right price at the right time."
Under the plan, smaller creditors should receive 20 cents on the dollar, Meyer said.
The Mendota Heights-based airline filed for Chapter 11 protection in October 2008 just days after its majority stockholder, Tom Petters, was arrested on fraud-related charges. Though the carrier had already begun instituting money-saving under CEO Stan Gadek, who arrived in the spring of 2008, it didn't have the cash to survive the slow fall season until bookings picked up in winter.
Sun Country has eliminated unprofitable markets or made them seasonal. It also began charging for baggage and food in coach. More recently, it started the full-service Sun Country Vacations and is adding summer flights to London, a first for the airline.
Sun Country has been working with investment banker Raymond James to solicit buyers for the airline -- although unsuccessfully. The reorganization plan indicated that the process was "exhaustive" and that the interest in it confirmed a price in the range of $10 million to $30 million.
Michael Meyer, Sun Country's bankruptcy counsel, said two prospective buyers had emerged. "We fully explored those possibilities and we never got to the point of a getting an offer from either of the prospective buyers," he said, declining to name them.
In 2006, Petters Aviation and Whitebox Advisors, a Twin Cities investment firm, acquired the low-fare carrier. Petters bought out the Whitebox stake a year later. Petters Aviation, which is also in Chapter 11, is still the main shareholder.
Meyer said that Monday's filing changes but does not sever the relationship with Petters Aviation and Petters Group Worldwide because both are major creditors, along with Whitebox.
The next step, Meyer said, is for the all parties to vote, which he expects will be approved in late June. Sun Country should emerge from bankruptcy at that time, he said. "It's been fully negotiated with the unsecured creditors committee and the Petters interests have been involved in negotiating the plan as well," he said.
Doug Kelley, the court-appointed receiver in the Petters case, did not immediately return a phone call seeking comment about what he might do with Petters' shares of Sun Country.
Petters was convicted of 20 counts of mail and wire fraud, money laundering and conspiracy to commit those crimes in December. He's scheduled to be sentenced Thursday.
Suzanne Ziegler • 612-673-1707
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