777 Partners has called in Los Angeles-headquartered restructuring advisors B Riley Advisory Services (a division of B Riley Financial) to assist with “various operational challenges.” The outcome follows the collapse of Australian low-cost carrier Bonza (Sunshine Coast) in which 777 held a majority stake.
“We have retained a team of professionals from B Riley Advisory Services to assist with managing through various operational challenges," reads a 777 Partners memo seen by the Financial Times. The Miami-based investment house called in the advisors to help "rationalise” the business and “select the most profitable path forward for our investments.” Last month, the private investment firm sold almost all of its minority stake in Canadian LLC Flair Airlines (Edmonton).
This comes in the wake of a court filing by London-based asset management company Leadenhall Capital accusing 777 and principals Joshua Wander and Steven Pasko of fraud and “operating a giant shell game at best, and an outright Ponzi scheme at worst”. 777 Partners denies the allegations.
B Riley Advisory Services MD Mark Shapiro has taken on the role of interim CEO and there are reports Wander and Pasko have been asked to resign. ch-aviation contacted 777 Partners and B Riley Advisory Services for comment.
Meanwhile, the first B737-8s placed at Bonza are starting to leave Australia after being seized by lessors late on the evening of April 29. VH-UIK (msn 43975) ferried out of Melbourne Tullamarine on May 11 and is now at Hurghada, while C-FLHI (msn 61804) departed Sunshine Coast Airport on May 9 bound for Calgary. At the time of writing, VH-UJK (msn 43974), VH-UJT (msn 62533), and VH-UKH (msn 61864) remain in Australia but are due to leave soon.
At a May 10 creditors' meeting in Sydney, Richard Albarran, a partner at administrator Chadwick Partner, confirmed the lessors had been unwilling to rescind their termination notices and would be removing their planes. All five Bonza aircraft are managed by AIP Capital, formerly a 777 Partners-controlled aircraft asset management entity but now an Advantage Capital Holdings LLC (A-Cap) entity. A-Cap is 777's primary funder but halted funding earlier this year. 777 Partners had been paying Bonza's lease payments but stopped when the A-Cap cash dried up, causing AIP Capital to issue default notices.
At the creditor's meeting, Albarran revealed Bonza owed over AUD116 million Australian dollars (USD76.7 million) before considering salaries and entitlements due to the LCC's 324 employees. Bonza folded just before it was due to process the monthly payroll, and April's salaries remain unpaid. Among the Bonza biggest debtors is 777 Partners, owed over AUD76.8 million (USD50.8 million). A-Cap, via 777, was funding Bonza's unprofitable tilt at cracking the Australian aviation market. Shortly before Bonza called it a day, A-Cap asked restructuring firm KordaMentha for advice on whether to keep propping up its Australian investment.
ch-aviation understands Bonza chose Hall Chadwick as administrator because it was the only one approached that was supportive of trying to revive the airline. All the others preferred liquidation.
Albarran told the creditors' meeting that around 20 parties had approached the administrator about taking over the airline. He declined to name the parties, citing commercial sensitivities. Around six of the parties are believed to be serious buyers. Among that number was VietJetAir (VJ, Hanoi Noi Bai International), who already fly to Australia and have over sixty B737-8s on order. However, the Vietnamese LCC ended the talks without making any offer.
Without aircraft and with a now-tarnished reputation, Bonza's primary asset remains its still valid Australian air operator's certificate (AOC). However, the issuing authority, the Civil Aviation Safety Authority, advises that the certification is only valid for the B737-8 type, meaning any potential new owner will need to source that aircraft type or have the AOC amended.
