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Fri, Jun 23, 2006

Symphony Aircraft Goes Into Protected Status

Has Plenty Of Orders... But Short Of Cash

They have the interest -- and they have the orders. What Symphony Aircraft doesn't have at the moment, however, is readily-accessible funding... which is why the company announced Friday it is going into protected status.

"We've been put into a position where we're seeking protection from our creditors under Canadian law," said Symphony Aircraft president and CEO Paul Costanzo to ANN.

Costanzo said the move to file for protection -- which is similar to Chapter 11 reorganization in the US -- comes as the company faces a variety of financial issues stemming from the cost of ramping up production of its SA160 two-place trainer aircraft, development of the glass-cockpit version and a diesel-engined variant of the plane.

The situation was further aggravated by the recent strength of the Canadian dollar against US currency -- as well changes in the Canadian investment market, which Costanzo says "absolutely stinks."

"There was a big change in the venture capital market with the change in government in Quebec in mid-2003," said Costanzo (right). "We're too big a project [to qualify] for small funds, and too young as a startup for institutional funds."

Shareholders in Symphony have decided "we want to keep going, without doing something significant," Costanzo added -- in particular, a possible relocation of the company's Three Rivers, Quebec production line to a location south of the border.

"Unless we get the financial solution we need in the very short term, there's a very, every big chance Symphony will move to the US," Costanzo said.

"There's no doubt in my mind this product is going to do fantastic, but as it's worked out -- Quebec isn't the place to be," Costanzo said. "Despite orders we've got, despite raving reviews on the product... there hasn't been enough to capture interest in Quebec."

Speaking of orders -- the company is not hurting there. Costanzo said the company has delivered 15 planes to date, with a firm order backlog of another 20. In April, Symphony also announced a letter of intent with Spartan College of Aeronautics to replace its current fleet of Cessna 152s and 172s with SA160s.

For the moment, Costanzo said, production has slowed. The first glass-cockpit SA160 -- featuring Avidyne's Entegra system -- is ready for delivery, with the second expected in mid-July... but as of now, the planes must sit at the factory.

"The board decided to go into protection, in part, as we still don't have type-certificate on the glass-cockpit planes -- so we're unable to turn those planes into cash," Costanzo said. Symphony hopes to have the Canadian TC in hand by mid-July, with FAA certification following one month later.

The company's creditors in the general aviation market -- such as Avidyne and Lycoming -- have expressed willingness to work with the company, Costanzo said. The problems have come from smaller creditors outside the industry.

The company's dealer network has also stood by the company "100 percent," added marketing consultant Jim Moore.

Costanzo estimates Symphony will need between $6 and $10 million to get back on its feet -- which the company will use to get the production line ramped up, seek certification for the Thielert diesel-powered version of the SA160, and continue development of a four-place aircraft.

While to date Canada hasn't proven to be a hospitable location for the company, Costanzo said, he adds the company would much rather remain where it's at, instead of facing the added costs -- both in money and in time -- of relocating elsewhere.

"This is a 'last call' to get capital in Canada," Costanzo said.

FMI: www.symphonyaircraft.com

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