(Winston-Salem Journal) A top unsecured creditor of bankrupt Dynamic International Airways LLC is attempting to force the High Point charter airline into liquidating its assets.
Dynamic, which specializes in low-cost international service to the public, filed for Chapter 11 bankruptcy protection July 19. It is not clear how many employees Dynamic has.
The bare-bones filing in U.S. Bankruptcy Court for the Middle District of N.C. came about seven weeks after Dynamic lost a legal fight in U.S. District Court for the Middle District.
Since declaring bankruptcy, the airline has continued normal operations through funding from a credit facility.
PMC Aviation LLC of Greensboro is owed $1.19 million, representing an arbitration judgment reached in April that Dynamic disputes. Dynamic says its filing was prompted by recent arbitration judgments against the company that it is challenging under the International Commercial Arbitration Act.
PMC claims in its motion for liquidation that Dynamic “is suffering from millions of dollars of continuing losses. … The debtor has been grossly mismanaged.”
Dynamic lists between 200 and 999 creditors, assets between $10 million and $50 million, and liabilities between $50 million and $100 million. The company projects funds will be available for distribution to unsecured creditors.
“The losses are stripping the estate of any meaningful assets to be distributed to the non-insider unsecured creditors,” PMC claims. “There is no reasonable likelihood of rehabilitation.”
PMC claims Dynamic officials have “materially misrepresented its financial position” to the U.S. Transportation Department, which it said has put Dynamic’s certificates for charter services “in jeopardy.”
PMC also claims Dynamic’s Chapter 11 filing is aimed at benefiting its financier, Kenneth Woolley, at the expense of unsecured creditors.
PMC’s motion is being opposed by unsecured creditor Worldwide Flight Services Inc. of Jamaica, N.Y., which is owed $123,773.
Worldwide, a supplier of airport ground-handling services, said in its motion, filed Thursday, that it has reached a services agreement with Dynamic that has been maintained through Wednesday.
Worldwide said its opposition centers on concerns that if Dynamic is forced into liquidation, it will not be able or willing to meet its operational agreement with Worldwide. It is requesting payment and other protections from the bankruptcy court.
Paul Kraus, the company’s chief executive, said in a statement that bankruptcy protection “will enable us to continue to serve our customers, keep our team employed and work with our vendors while we navigate through the challenges presented.”
Tony Plath, a finance professor at UNC Charlotte, said Dynamic likely opted for bankruptcy protection “to delay the creditor’s ability to collect on the judgment and the manner in which collection is achieved.”
How successfully the strategy may be, Plath said, “depends on how receptive the bankruptcy judge is to their argument, and how willing the creditor is to agree to Dynamic’s proposal to change the remittance of payment against the judgment.”
Dynamic’s largest unsecured creditor is Air India Inc. at $10.5 million from another arbitration award that Dynamic disputes. B.K.P. Enterprises & Expim International of Greensboro, was awarded a combined $3.49 million arbitration judgment in December that Dynamic also disputes.