Loadmaster in limbo as Ayres fades away

 - May 7, 2008, 7:32 AM

Ayres Corp. is no more and the prospects for the Loadmaster LM200 are now bleaker than ever. On August 7, GATX Capital, which had been operating Albany, Ga.-based Ayres Corp. using “debtor in possession” financing since Ayres entered Chapter 11 bankruptcy in November last year, foreclosed on the debt-ridden company. As legally required under such a transaction, the name of the company was changed; hence, Ayres Corp. is now Quality Aerospace.

Former Ayres CEO Russ Heil, who had been appointed by GATX Capital after Ayres declared bankruptcy, resigned the day before the foreclosure and all but six employees were laid off, with former plant manager Milt Humphreys left in charge.

GATX Capital, based in San Francisco, is a subsidiary of Chicago-based GATX Corp., a specialized finance and leasing company that focuses primarily on railroad, commercial aircraft and marine assets. As a financial firm, GATX Capital has no intention of operating an OEM, so it is actively seeking buyers for the former Ayres facility and aircraft programs. According to a GATX Capital spokesperson, at least two buyers interested specifically in the Loadmaster LM200 program are conducting due diligence. In January, Heil told AIN that about $80 million would be needed to fund the Loadmaster program through certification. Ayres’ Turbo-Thrush agplane assets are also for sale.

Although the Ayres-FedEx Loadmaster contract has been effectively “breached in many ways,” the spokesperson told AIN that FedEx, also an Ayres’ creditor, has said in a letter that it is still willing to consider buying 75 to 100 LM200s. However, Greg Rossiter, a FedEx spokesman, would not speculate on FedEx’s intentions regarding the Loadmaster, saying only, “We advised our shareholders at the end of the fourth quarter of the fiscal year that we do not anticipate receiving any aircraft from Ayres and that we have therefore taken a write-off of our deposit on the Loadmaster program.” He said FedEx had invested about $9 million in the program and added, “FedEx was very closely involved in the design and we still think it is a terrific aircraft.”

FedEx’s initial order with Ayres, signed in January 1997, was for 250 aircraft, of which 50 were firm and 200 were optioned. Back then, Ayres said the 19,000-lb mtow freight-hauler would fly in July 1998, and that certification and initial deliveries would follow in December 1999. In June 1999 FedEx converted 25 of its optioned aircraft to firm orders, keeping 175 as options. Ayres announced at the same time that Duijvestijin Aviation, a Dutch leasing company, had exercised its option for five additional LM200s, increasing its firm order to 10, and that Kelner Air Centers of Thunder Bay, Ontario, had signed an agreement for 10 Loadmasters. In all, Ayres reported having orders for at least 25 Loadmasters, in addition to those from FedEx. Target price of the LM200 was $4.5 million to $5 million, depending on configuration.

GATX Capital acquired all of Ayres’ assets with a $10 million “credit bid,” which reduced the amount Ayres owes GATX Capital, but does not cover all the debt owed to the finance company. According to the GATX Capital spokesperson, Fred Ayres, former sole stockholder, is still trying to raise money to buy back the company from GATX. He did not bid in the foreclosure auction, however. In the opinion of one source familiar with the situation, “Fred Ayres will never be able to raise another dime of capital in this industry. The Loadmaster is dead.”

Complicating the sale are other debts and assets, including the sole Let L-610 prototype, in storage in Albany, and Loadmaster tooling and parts at Let, which itself was brought out of bankruptcy in June, by Czech aircraft manufacturer Moravan. Ayres had bought Let in August 1998, intending to use the facilities to build most of the components of the Loadmaster. After two years under Ayres management, however, Let declared bankruptcy on October 25 last year.