-T / T / +T | Comment(s)

Monday, December 8, 2008

DayJet Bankruptcy: A Story of Brinksmanship

The decision to shut down DayJet operations on September 18 was coupled with a decision to put it into Chapter 7 liquidation rather than Chapter 11, according to court papers filed November 14 when the company officially declared bankruptcy. Chapter 11 would have required an immediate cash infusion which was not forthcoming despite efforts by investors to raise more capital.
The decision came after a three-day, marathon effort to cobble together enough financing to get it through September and the first week of October when a major investment was expected from an unnamed Jordanian. It estimated a need for $1 million and was facing $13 million in payables coming due. Ironically, during the meeting, it was pointed out that, in terms of the number of flight reservations, September 16 was its best day ever. Despite the strong reservations, a $90,000 payment from Eclipse Aviation was only enough to take it through September 18.
The minutes of the board meeting held between September 15 and 18 tell the story of a last-ditch effort to save the unique carrier.
DayJet was negotiating with an unnamed Jordanian investor for, first $9 million, and later, $12 million in financing. It was also working on a possible merger with Massachusetts-based Linear Air, a fellow Eclipse 500 operator with a more convention operating model. Linear Air did not return requests for an interview at press time.
It was able to raise $1.5 million in financing thanks to the representative for its largest note holder, Pan Atlantic Investments. That money would comfortably see it through September but the investment required $1.5 million in matching funds, which it could not raise until the closing of the Jordanian deal, some three weeks hence.
At the time of its bankruptcy its total assets were listed at $17,166,827 compared to total liabilities of $23,094,811. In Eclipse’s bankruptcy filing DayJet was listed as owed $6.2 million. Eclipse seized its aircraft after the shutdown. Total secured debt totaled $2.9 million while total unsecured priority claims amount to $351,418. Total unsecured, non-priority claims are at $19.8 million.
The court documents showed revenues of only $275,253 in 2008 and, in 2007 of $474,747, all stemming from software development. Other income for 2008 was reported at $33.417 compared to $986,836 in 2007. Documents did not break out revenues from the air taxi business.
The company was working with Vishwa Chandra of Singularity Ventures, which represented the Jordanian investor. During the September 15 board meeting CFO John Staten, who replaced CEO Ed Iacabucci after the shutdown, reported that it only had enough capital on hand to operate until the following day. However, the Jordanian investment would take an estimated three weeks with no bridge loan in the picture.
Court documents show three different companies under the DayJet umbrella – the air taxi, DayJet Services, DayJet Leasing, its aircraft leasing subsidiary, and DayJet Technologies LLC, its software development arm. It was the latter entity that was of most interest to the Jordanian investor, according to the minutes of its last board meeting. However, both United Technologies and GTD Investments were awarded options in the subsidiary. It seems DayJet was selling its 35 percent minority stake in the technology company. However, GTD, while pledging an additional $250,000 cash infusion, objected, although directors questioned whether or not it legally could. Even the Jordanian investor acknowledged the increased risk accompanying any deal in which the minority stake was sold. Court documents indicated that most investments were made to the company in order to gain a stake in DayJet Technologies.

Live chat by BoldChat