Grounded Airline May Fly Again Federal Bankruptcy Judge Oks Financing Plan For Kiwi

A federal bankruptcy judge on Thursday approved a financing plan that could put Kiwi International Air Lines back in the air before Thanksgiving.

The 15-jet carrier, whose 1,200 furloughed workers own a majority stake, secured a $5 million loan from a Florida investment group that ultimately could gain control of Kiwi and extract it from Chapter 11 reorganization.

The first $500,000 installment is to arrive Monday, when Kiwi plans to announce which routes it will fly and how many workers will be recalled.

In addition to the loan, Wasatch International Group is trying to raise $15 million to $20 million in outside investment, said John B.M. Frohling, Wasatch’s New Jersey lawyer.

Kiwi had been on the brink of liquidation several times since filing for bankruptcy Sept. 30, but U.S. Bankruptcy Judge Rosemary Gambardella repeatedly allowed it to operate on cash pledged as collateral for debts as it searched for a white knight.

Two week ago, however, the airline exhausted its funds and suspended scheduled flights. The airline, which leases all of its planes, continued flying charters.

Then came Wasatch, based in Boynton Beach, Fla., which offered to invest in the 4-year-old airline. Kiwi told Gambardella that the agreement with Wasatch would be finalized by the weekend, but that did not happen until Tuesday. As a result, Kiwi does not yet have the first installment of the loan.

“This is something that we would have been happier if we actually had the money,” Kiwi bankruptcy lawyer Howard S. Greenberg acknowledged.

Frohling said, “It was too much to ask in too short a time,” with details and documents to be worked out.

If the airline were to fail, the 1,200 workers would lose their entire investments, which Kiwi has said total about $7 million.

Creditors would not receive full payment, because the airline listed $35 million in assets and $55 million in liabilities as of Aug. 31.

The Kiwi undertaking would be the largest for Wasatch. It is also seeking to develop resorts and casinos in the Caribbean and to acquire a bankrupt cruise ship, the Viking Princess, Frohling said.