Former buyers left empty-handed; Company is privately held in the murky tax havens of Cayman Islands, Luxembourg
By FRANÇOIS SHALOM, The Gazette March 23, 2012
Questions and uncertainties abound in this week’s dissolution of Montreal’s Aveos Fleet Performance Inc.
But the simplest question appears to be the hardest to answer: Who, precisely, owns Aveos?
Even court documents shed little light on the subject, except to confirm that the company is privately held and “domiciled” in the Cayman Islands and Luxembourg. Both are tax havens and their opaque and secretive banking laws are often used by large hedge funds, banks, multinationals and individuals, making it difficult to determine the real owners of assets.
As reported on Jan. 28, 2010, Aveos’s then-president Chahram Bolouri declined repeatedly in an interview with The Gazette to identify the new owners who had just acquired the firm.
Bolouri would only say that the new shareholders were largely former creditors, “about four or five” banks and hedge funds, mostly from the U.S.
The company had just completed a secret, year-long negotiation to recapitalize, converting about $800 million of debt into equity.
Before the 2010 deal, Aveos was owned by legendary Manhattan leveraged buyout firm Kohlberg Kravis Roberts & Co. (KKR) and Greenwich, Conn.-based Sageview Capital LP, each with 35 per cent. ace Aviation Holdings, the parent company of Air Canada, had between 23 and 27 per cent, and Aveos managers and shareholders together owned between three and seven per cent of the firm.
Unusually, KKR walked away after three years of co-ownership, having made no money on the deal. Sageview, made up largely of former KKR managers, also reportedly left empty-handed. ACE’s stake in Aveos reportedly fell to about 17 per cent.
Court documents filed Tuesday show that Aveos was losing $500,000 a day and that all board members resigned on – or prior to – Tuesday.
Aeroman, an El Salvador based MRO owned by Aveos, is not affected by the insolvency because it was kept at arm’s length as a separate corporate entity, one source said.
Aeroman is also partly owned by El Salvador’s national carrier Grupo TACA.
By common agreement of the parties, including Air Canada, Aveos, Crédit Suisse and a comptroller from FTI Consulting Canada Inc., the monitor in the case, Jonathan Solursh of Toronto firm R.e.l. Inc. was appointed chief restructuring officer in the case.
Solursh did not reply to voice mails and emails seeking clarification on the company’s ownership.
It wasn’t immediately clear why brokerage Crédit Suisse was a party, other than “the likelihood that it will lose money,” nor whether Solursh is still active in the case given that the issue now is one of liquidation rather than restructuring.
Monitors Greg Watson and Toni Vanderlaan of FTI Consulting did not return calls.
Gerry Apostolatos and Tina Hobday of law firm Langlois Kronstrom Desjardins LLP, who represent the International Association of Machinists and Aerospace Workers union that represented the Aveos workers, also did not return emails and voice mails seeking comments.
Geneviève Sicard, press secretary to Transport Minister Denis Lebel, reiterated that “Aveos’s decisions are those of a private company.”
But “the law is the law: the Air Canada Public Participation Act requires Air Canada to maintain operational and overhaul centres in Montreal, Mississauga and Winnipeg.”
She did not provide promised further clarifications.
It also didn’t take long for creditors to line up demanding to be paid.
In fact, Metafore Technologies Inc. was one of the prescient ones. It filed a motion in Quebec Superior Court to recover $236,490.68 for goods and services it provided Aveos in information technology. The request was filed on March 15, two days after The Gazette first disclosed on March 13 that Aveos was likely to file for bankruptcy protection. It did so on Monday and shocked the industry by declaring itself insolvent the following day.
Metafore Technologies lawyer Claude Pelletier of law firm Heenan Blaikie LLP did not return calls Thursday.
A former Aveos employee said that many of the 2,600 employees will seek leave to launch a class-action against the Canada Industrial Relations Board.
Air Canada said late-Thursday that “on a transitional basis, the airline has identified qualified and government-approved maintenance facilities in Canada and the U.S. to undertake work scheduled to be performed by Aveos. … Transition to new service providers is already underway and will have no impact on customers.”
Three planes have already been assigned to go to MRO firm Premier Aviation Overhaul Centre Inc. of Trois Rivières, the carrier said, and it is arranging to finish work on three planes at the now-shuttered Aveos plants.
The airline “encouraged” global MRO companies to buy up the “viable” parts of Aveos.
Alan Butterfield, vice-president for maintenance and engineering said in a statement that “Air Canada has a strong preference for working with global MROs … in Canada, with particular emphasis given to Montreal, Winnipeg, Vancouver and Toronto. There exists a pool of well-trained, qualified and talented people available in these cities.”
But the MROs will have to have “globally competitive cost structures,” the airline said.