LZ claims to be unfazed by Moravan bankruptcy
After announcing plans to lay off up to 350 employees starting March 1, Moravan Aeroplanes’ LZ Aeronautical Industries division continues to champion the long-foundering Let L-610G as a viable program, despite the uneventful passing of the Czech company’s own year-end 2002 funding deadline. Meanwhile, Dr. Ilan Meluzin of the regional court in Brno confirmed last month that a judge has declared Moravan Aeroplanes’ parent company, Moravan Otrokovice, bankrupt.
The court has assigned a company by the name of Leges, based in Zlin, as the administrator of the company’s assets. Leges principal Josef Orbis told AIN last month that Moravan creditors would meet on March 5 to form a creditors’ committee. The original bankruptcy petitioners include the Prague-based private bank CSOB, Moravan’s lead creditor.
Attributing the need for the layoffs to increased fuel prices, global economic stagnation and a strengthened Czech currency against the dollar, LZ nevertheless insists that certification of the 40-seat L-610G remains in its plans, citing interest from the Republic of Korea for 20 of the turboprops. However, LZ commercial director Patrik Joachimczyk told AIN last fall that if the company had not obtained a commitment for $40 million to complete certification by the end of last year, it would give up trying to take possession of the program’s only prototype, still in storage in the U.S. and under the control of receivers of the bankrupt Ayres Corp., Let’s previous owner.
Although LZ only recently reiterated its ambitions to strike a deal with the South Korean concern, reports about the existence of such a contract date back as far as early 2001, before bankruptcy trustee Zlatava Davidova awarded the assets of the insolvent Let Kunovice to Moravan. By that time, Ayres had ferried the only L-610G prototype to a hangar near its headquarters in Albany Ga., where it remains to this day. In response to a complaint by Ayres creditor First National Bank of Georgia, the U.S. Bankruptcy Court for the Middle District of Georgia last August ruled that the L-610G belonged to the bankruptcy estate of Ayres Corp., and that the bank held a secured interest in one of its two GE engines. General Electric retains the rights to the other engine, which it loaned to Let for certification.
The court rejected Davidova’s assertions that Czech law invalidated the transfer of the airplane from Let to Ayres. Therefore, LZ cannot retrieve the prototype without first negotiating for it from the airplane’s lienholders, including the First National Bank of Georgia, which loaned Ayres $200,000 in return for a security interest in both engines.
Brink Eyes Czech Mate
One of Davidova’s arguments–that the transfer of the aircraft within six months of a liquidation filing against Let ran counter to Czech bankruptcy law–also forms one basis for Randall Brink’s assertions about the impropriety and illegality of the Let transfer to Moravan. Brink, the Seattle-based entrepreneur whose aspirations to form a new commuter airline in the Puget Sound area also involve the takeover of Let, asserts that CSOB filed a bankruptcy claim against Moravan before Davidova transferred the Let assets to the Czech lighplane builder in July 2001, a circumstance that should have disqualified Moravan from the tender.
Moravan executives denied the existence of any bankruptcy petitions, and filed suit against several Prague newspapers for reporting on the company’s potential insolvency. Davidova then began drawing distinctions between Moravan Otrokovice and its subsidiary, Moravan Aeroplanes, under which LZ Aeronautical Works operates as a division. “They are still saying that Moravan Otrokovice will get Let, when in fact it was Moravan Aeroplanes who proceeded through the tender,” said Davidova in response to the newspaper reports. Pressed on the issue, Joachimczyk last month finally acknowledged to AIN the existence of a bankruptcy proceeding against Moravan Otrokovice, but he insisted that Moravan Aeroplanes operates as a completely separate entity.
“They’re implying that the bankruptcy claims against Moravan Otrokovice don’t invalidate the transfer of Let to Moravan Aeroplanes,” countered Brink. “The fact is they are unequivocally one and the same company. Not only is Moravan Aeroplanes 100-percent owned by Moravan Otrokovice, the companies share the same commercial registry, address and identity.”
Brink had issued his own bid for Let during the 2001 tender process, but after he requested more detailed legal documents to guarantee the security of a required $1 million deposit, Davidova disqualified Brink from the bidding for lack of funds. At press time Brink’s lawyers in the Czech Republic awaited word from the regional court in Brno for a hearing date to determine the legality of the Let transfer to Moravan.