High-Interest Loan Must Be Repaid In Spring '09

There's been a plot twist in the drama that is Sun Country Airlines.

In our last episode, in October, the airline's parent, Petters Aviation, LLC, had just filed for bankruptcy. Primary shareholder Tom Petters still sits in jail without bail, facing federal investment fraud and money laundering charges unrelated to Sun Country.

The small airline has a distinctly seasonal business cycle, with low revenues in the fall, and business picking up each winter. The airline has been in the habit of borrowing money from elsewhere in the Petters corporate family each fall to tide it over.

In his first few months on the job, new CEO Stan Gadek made progress toward ending the need for annual cash infusions. He cut his own pay in half, won union concessions, and brought in new business, including military contracts and all the campaign flights for US Senator Joe Biden.

Despite fuel prices that drove larger competitors deep into the red, Sun Country actually turned a profit in July and August. But cash reserves weren't adequate to make it through the fall.

When Petters resigned as Sun Country's chairman and his offices were raided by the feds in late September, the annual loan was suddenly off the table. Gadek told employees they'd have half their pay deferred into 2009, to be repaid with interest, and fought to get November and December payments to creditors deferred. Somehow, he kept things together.

Now, the Minneapolis Star-Tribune reports US Bankruptcy Judge Robert Kressel has cleared the way for Sun Country to borrow an unspecified sum from Petters subsidiary Elite Landings, at an interest rate of 10 percent, to be repaid in April. The approval came over the strong objections of Acorn Capital Group, one of the creditors in the Petters bankruptcy.

The Star-Tribune reports Rob Kugler, an attorney for the creditors, argued that all Petters Aviation assets should be liquidated, and complained that he was shut out of the negotiations on the terms of the loan.

And so, Gadek keeps the ship afloat, Sun Country lives to fight another day, the employees keep their jobs... and only the lawyers go home mad.

FMI: www.suncountry.com