Western Global files for chapter 11 bankruptcy protection
07 / 08 / 2023
Source: Carlos Yudica/Shutterstock
Troubled US freighter operator Western Global Airlines (WGA) has filed for Chapter 11 bankruptcy protection as part of efforts to stabilise operations.
Following on from reports last week that the airline had reached a bankruptcy financing deal, WGA today confirmed that it had filed for the protection whilst also reaching an agreement with key financial stakeholders on the company’s reorganisation.
The agreement sees the company enter Chapter 11 with more than $77m of financing from founder Jim Neff and bondholder investors (Ad Hoc Group).
“Once the reorganisation is implemented, it will materially reduce the company’s debt by over $450m, infuse significant new capital into the company, and give the reorganised WGA the ability to continue its commitment to sharing the economic benefits of ownership with employees,” WGA said.
“The restructuring support agreement (RSA) achieves many of the goals WGA sought from the outset of its restructuring efforts, including deleveraging the balance sheet by 86% and partnering with new investors.”
WGA has filed certain “first day” motions within the US Bankruptcy Court that, upon approval, will support ordinary-course operations including, but not limited to, continuing employee compensation and benefits programmes, honoring customer commitments, and fulfilling go-forward obligations to vendors.
“Such motions are typical in the Chapter 11 process, and WGA expects that they will be approved within the first few days of the case,” the company said.
WGA said that it would continue to “operate as usual and provide reliable and safe service to its customers” throughout the reorganisation process and going forward.
In June, Neff purchased $115m of outstanding senior secured debt for $45m to help improve the company’s lending conditions.
“I am — and always will be—loyal to WGA and its employee team,” said Neff. “As such, my number one priority is preserving the long-term viability and value of WGA and protecting our employees.
“The plan we have outlined in the RSA reflects my continued dedication to and belief in WGA, along with the overwhelming support of our key financial stakeholders.
“I am confident that this plan will tremendously strengthen our financial position and ensure a better future for WGA, our people, and our customers.”
Earlier this year, ratings agency Moody’s downgraded the carrier’s ratings from B2 and B3 – later withdrawing its rating – citing a liquidity shortage.
The ratings downgrade reflected the “modest scale, aged fleet composition, high customer concentration – top three customers were 64% of total revenue as of 30 September 2022 – and negative tangible equity”.
The situation the airline reportedly finds itself in is in contrast to its expansion plans of the last couple of years as freighters were in high demand as a result of the Covid crisis.
In late 2021, Western Global had plans to expand its freighter fleet approved by the US Department of Transportation.
Two months later the carrier confirmed its now cancelled order for two 777 freighters from Boeing.
Since then the air cargo market has cooled, with demand declining, belly capacity returning and fuel prices increasing.
According to its website, Western Global currently operates a fleet of 19 MD-11 and 747-400 freighters.
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