Second Announced Bankruptcy In 48 Hours Closes Down Production

ANN REALTIME REPORTING 01.24.07 1330 EST: Aero-News has learned Symphony Aircraft Industries (SAI), entered bankruptcy on January 22... closing the chapter indefinitely on production of the high-wing, two-seat aircraft in Trois-Rivieres.

Below is the letter sent by former Symphony CEO Paul Costanzo (below right) to Symphony customers, describing the series of events that brought the company to this point.

On Friday January 19th, 2007, the lead investor, after having reviewed the revised funding plan (modified by both a co-investor and certain secured creditors) decided to withdraw from the file.

This has had dire consequences. On January 22nd, 2007, as SAI was in court to have the Plan of Arrangement with its creditors ratified, secured creditors took action to dispute the ratification (on account of the collapse of the funding plan) and filed a petition in bankruptcy.

As a result, the court rescinded Symphony’s protection from its creditors, which in turn resulted in the company being declared bankrupt this morning. A trustee has been appointed to oversee the bankruptcy proceedings, with the mandate to sell all of the assets of Symphony.

 The trustee is Eric Pronovost, of Belhumeur Pronovost (819-697-0009). The trustee has yet to decide whether he will maintain the engineering resources required for SAI to maintain the Type Certificate during the liquidation proceedings.

The SAI facility is no longer open -- all employment at SAI was terminated. As such, I am writing this to you as a former employee of SAI.

With respect to customer deposits, they will be treated as unsecured debts of SAI. It is extremely unlikely that the proceeds of liquidation will be sufficient to pay the secured creditors, and as such the entirety of these deposit amounts will more than likely be lost.

I regret to be the bearer of such awful news. I know that many of you had much invested through both time and money to bring this aircraft to market. It was and always will be much appreciated and I can only hope that someday those efforts may be repaid somehow or someway by this product line.

Symphony's announcement comes on the heels of another general aviation manufacturer declaring bankruptcy. On Tuesday, Tiger Aircraft announced it filed for Chapter 7 liquidation January 16.

The first signs of trouble at Symphony came in June 2006, when the company announced it was entering protected status under Canadian law. At that time, Costanzo told ANN the move to file for protection --  similar to Chapter 11 reorganization in the US -- was due to changes in the venture capital market, which had made Symphony less attractive to potential investors. In short, the company was out of cash.

Costanzo also talked of a move to the US, away from the Canadian investment market -- which he said "absolutely stinks."

Without funding, Symphony was unable to deliver planes to customers -- and there were customers. Several orders, in fact, including a deal with Spartan College of Aeronautics to replace that school's entire fleet of C152s and C172s. The company also planned to develop a four-seat aircraft, as well as a diesel-engined variant.

The first two Symphony 160s equipped with an Avidyne Entegra glass panel were also waiting to be delivered as the company entered protected status. The company was waiting on the needed Canadian and FAA certifications for the glass panel upgrades... which never came.

ANN will continue to update this story as more details become available.

FMI: www.symphonyaircraft.com (Still active at this writing)