SJ30 supplier purchases Emivest assets from bankruptcy

 - April 29, 2011, 11:10 AM

After months of legal wrangling and speculation, the assets of the SJ30 light jet program were purchased on April 7 from bankrupt Emivest Aerospace by the parent company of one of the aircraft’s primary airframe suppliers, Utah-based Metalcraft Technologies, for $3.5 million in cash.

Sources close to the transaction who requested anonymity told AIN that the Metalcraft purchase is the first step in restarting aircraft production with a “clean slate” free of long-term debt and other obligations incurred by several previous owners that were viewed as retarding the program’s progress. That clean slate apparently includes rationalizing production including the closure of Emivest’s Martinsburg, W.Va. plant, producer of the airplane’s wings, and its San Antonio headquarters and final assembly hangar. Aircraft production is expected to be moved to Utah. These same sources said that a U.S.-based investor pool has pledged up to $150 million to get the SJ30 program going again. “This is a positive development,” one source said. From its inception in 1989, the SJ30 has racked up costs estimated at close to $1 billion, while delivering only four of the $7.25 million jets.

Metalcraft’s purchase was combined with a $1.17 million contribution from UK-based Action Aviation, a customer/distributor for the aircraft and an operator of one of the four currently flying. The proceeds were used to satisfy repayment of $4.5 million in debtor-in-possession (DIP) financing obtained from commercial third parties following the October 2010 Chapter 11 bankruptcy filing. Absent this repayment, the DIP financiers could have taken possession of the program’s assets.

Emivest used the funds to finance continuing operations during the bankruptcy, including product support for the four aircraft flying. Those aircraft have logged between 300 and 1,000 hours each since delivery, which began after certification in 2005. The last two aircraft were delivered in 2009, with one taken by actor/producer Morgan Freeman. The deal also included a pledge to honor a $1.688 million customer deposit on one of four aircraft under construction at the time of the bankruptcy filing. Emivest’s assets, including parts and engines for three of the four aircraft on the production line, were valued by a source close to the company at approximately $40 million.

On its own, Metalcraft, maker of 70 percent of the SJ30’s sheet metal and the tail, seems unlikely to place the aircraft back into production. While Metalcraft makes various airframe components for OEMs such as Boeing and Northrop Grumman, several commercial business rating companies peg the Cedar City, Utah company’s overall employment at approximately 120 and annual sales at less than $10 million. Calls to Metalcraft CEO David Grant were not returned.

During the bankruptcy proceedings, Emivest enlisted Metalcraft as a “stalking horse bidder” in an attempt to set a floor price for an auction sale of the company’s assets. As late as February, Metalcraft had bid $7.65 million for them, while other and substantially higher offers were rejected. Last December, Williams International CEO Gregg Williams, whose company makes the SJ30’s FJ44-2A engines, asked the federal bankruptcy court in Delaware to approve sale of Emivest’s assets to China’s Aviation Industry General Aircraft (Caiga, also known as Avic General Aviation) for $19 million. It is not clear whether Caiga ever made a formal offer for the assets; however, at least one other offer in a similar price range apparently was rejected. As no other bidders came forth and the latest DIP financing agreement was about to expire, Metalcraft came forward with its revised offer

The SJ30 was designed by Ed Swearingen in the mid-1980s and received FAA Part 23 certification 20 years later in October 2005–since when, as already noted, only four aircraft have been delivered. At one time the program claimed orders for more than 200 aircraft. However, at least 150 of those were from one customer, Action Aviation. In 2008, Dubai-based Emivest purchased 80 percent of the company, then known as Sino Swearingen, and announced plans to inject another $1 billion into it. However, Emivest’s actual investment was far less. Court documents reveal that Emivest infused $38.4 million into the company from a revolving credit line. o