US freighter operator, Western Global Airlines (WGA), has filed for Chapter 11 bankruptcy protection.
The troubled cargo carrier based in Estero, Florida — confirmed that it filed for bankruptcy protection and struck an agreement with important financial stakeholders on the company's reorganization following reports the past week that the airline had reached a bankruptcy financing deal.
"Western Global Airlines (WGA), a US FAA 121 cargo airline, announced that the Company has reached an agreement with key financial stakeholders, including existing bondholders holding more than 85% of the outstanding senior unsecured notes due in 2025, in support of a reorganization plan to stabilize the business and its financial future, with WGA's founder, Jim Neff, reinvesting alongside bondholders and other financial partners," the cargo carrier announced.
It added that the agreement ensures that WGA continues to operate without interruption and meets customer needs with safe, effective, on-time service delivery.
"To implement the plan, WGA has filed for voluntary protection under Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware," WGA said.
The agreement sees the company enter Chapter 11 with more than US$77 million of financing from its founder Jim Neff and bondholder investors (Ad Hoc Group) that will support the company's operations through the Chapter 11 cases.
"Once the reorganization is implemented, it will materially reduce the company's debt by over US$450 million, infuse significant new capital into the company, and give the reorganized WGA the ability to continue its commitment to sharing the economic benefits of ownership with employees," the announcement added.
"The 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 further said.
Operations to remain as usual
WGA noted that it will continue to operate as usual and provide reliable and safe service to its customers throughout the reorganization process and going forward.
The company said that it focused on moving through this process expeditiously.
This follows a substantial investment by Jim Neff on June 29, 2023, wherein he purchased the company's US$115 million of outstanding senior secured debt for US$45 million in a competitive process independently conducted by the lenders — a transaction that immediately improved the company's lending conditions.
To further support the restructuring process described in the RSA, Neff will forego some statutory rights and pass on US$70 million to other stakeholders, including bondholders, employees, and ESOP, for their greater consideration and value.
"As the Founder and CEO of Western Global Airlines, I have always understood the unique value proposition that WGA brings to the world as a reliable, responsive, and low-cost international air cargo provider," Neff said.
"I am — and always will be — loyal to WGA and its employee team. As such, my number one priority is preserving the long-term viability and value of WGA and protecting our employees. All my objectives regarding the Company align with this overriding goal."
"... I am confident that this plan will tremendously strengthen our financial position and ensure a better future for WGA, our people, and our customers," Neff added.
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 programs, honouring 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.
In end-June, financial services company Moody's revoked its credit rating for freighter operator Western Global Airlines, and reports indicate that the business may be considering bankruptcy.
