Silver Airways, the financially troubled regional carrier serving Florida, the Bahamas and the Caribbean, tried to sell itself in a bankruptcy auction last week.
But no bidders showed up to contest a so-called “stalking horse” offer at a May 28 auction, and the airline is now working to close the sale of all of its assets and those of a Caribbean affiliate to a private equity group, its chief executive said in a court affidavit filed Wednesday.
U.S. Bankruptcy Judge Peter Russin of Fort Lauderdale green-lighted an auction last month after polling the Hollywood-based airline’s major creditors.
But Steven Rossum, the CEO, president and general counsel, declared in a six-page affidavit that despite expressions of interest from a wide array of potential bidders, no one stepped forward with a better offer than the $5.775 million bid from an acquisition firm affiliated with Wexford Capital of Greenwich, Conn., and West Palm Beach.
Silver said in court filings posted Wednesday that the company is moving forward with a deal that would also allow the acquisition firm, Argentum Acquisitions Co. LLC., to acquire Silver’s affiliate in the U.S. Virgin Islands, Seaborne Airlines, which serves St. Thomas and St. Croix. Both airlines filed for Chapter 11 bankruptcy protection on Dec. 30, 2024. Rossum oversees both carriers, which have continued to fly during their respective bankruptcy cases.
Under the deal, Argentum would receive all of Silver’s “aircraft and related equipment, ground support infrastructure, airport gate leases, maintenance and operations facilities, receivables, and intellectual property,” according to Rossum’s affidavit.
A court hearing seeking approval of the Argentum offer was scheduled for Wednesday afternoon, but Silver’s lawyers have requested that it be continued to about June 10. Both sides are working toward a “transition services agreement” required by Argentum, according to a court filing by Silver attorney Brian Hall. The deal also requires Federal Aviation Administration approval and can take up to 60 days. While the technicalities are worked out, Silver and Seaborne would remain operating under bankruptcy court supervision.
Lots of interest, no competing offers
Rossum in his affidavit said multiple parties expressed interest in acquiring both airlines, either as a package or individually. But ultimately they all took a pass despite an aggressive marketing effort by his management group.
“No qualified bids were received by the bid deadline for Silver’s assets and no auction was held,” Rossum said in his affidavit, which offered no reasons for the lack of bidding.
“Our management team contacted and sent marketing materials to over 75 potential acquirers and finance parties, of which approximately 25 executed non-disclosure agreements and requested further marketing materials and financial information,” Rossum wrote.
“Included in the parties which expressed interest in the Debtors were airlines [both domestic and international, cargo and passenger], private equity firms, aviation entrepreneurs including former airline executives, and other financial partners that specialize in distressed assets,” he said.
At least eight parties provided written expressions of interest and “six or more have provided written expressions of interest for Seaborne’s assets, with four of those indicating that they would purchase both airlines.”
“In my opinion and business judgment, the bid procedures provided for an orderly and competitive process through which interested parties could have submitted bids to purchase Silver’s assets,” he added in his affidavit supporting court approval of the Argentum bid. “The bid procedures and sale process allowed the debtors to test the value of their assets and sufficiently exposed the assets to the market.”
The failure to produce a bidding contest represented another dagger for an airline with a history of financial troubles.
A turbulent ride
Silver’s operations have diminished since it filed for Chapter 11 in December. Silver now serves five Florida cities including Tampa, Key West, Tallahassee and Pensacola from a hub at Fort Lauderdale-Hollywood International Airport. It also serves 11 destinations in the Bahamas and Caribbean.
Silver’s fleet has been reduced from 16 to eight turboprop ATR aircraft. Its employee roster has declined from more than 600 people to 387 flight crew members and ground workers as of April 30, according to court records.
Silver filed for Chapter 11 with more than $400 million owed to secured and unsecured creditors including its principal lenders, airports, tax collectors, aircraft leasing companies and a major fuel company. For more than three months after the filing, the airline struggled to raise and preserve cash, delayed payments and relied on the largesse of the leading secured creditor, Brigade Agency Services, which supported multiple interim requests for the airline to draw down on the business’s cash collateral. But even that was not enough to sustain Silver’s day-to-day operations during the bankruptcy.
In April, Wexford affiliate KIA II LLC stepped in to provide $5.5 million in critical debtor-in-possession financing, which allowed payments to flow to creditors owed money for services rendered after the Chapter 11 filing. At the same time, Argentum, another Wexford affiliate, made its “stalking horse” offer to buy Silver outright for $5.775 million.
Judge Russin was initially hesitant to allow an auction to move forward, noting the Argentum offer was nowhere near the total amount owed creditors.
“It is not lost on the court that the debtors borrowed collectively several hundred million dollars, yet the contemplated asset sale values total at present less than $10 million,” Russin wrote in an order approving an auction.
“Yet the record also reflects something more: the informed and express support of nearly every major administrative claimant and the prospect, though far from guaranteed, that competitive bidding on Silver Airways assets and the sale of Seaborne’s assets may yield meaningful payment,” the judge said.
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