Offer for Island Air assets drops once again

The amount of money that Island Air’s trustee was hoping to recover in a sale of the company’s assets has dropped significantly again.

A subsidiary of Hawaiian Airlines’ parent company is now offering just $550,000, down from its previous offer of $625,000 and lower than its original bid of $750,000.

While the operating certificate is still scheduled to be sold for $450,000, Hawaiian Holdings Inc. subsidiary Elliott Street Holdings Inc. has reduced its offer for the remaining assets to just $100,000 after the trustee discovered that assets identified in Island Air’s filings were not owned by the bankrupt airline and are or may be leased.

The offer for the remaining assets originally was $300,000, but last week Hawaiian reduced its offer to $175,000 after it was discovered that Island Air previously had submitted an erroneous filing and sold spare parts for “quick cash,” just before seeking bankruptcy protection.

Hawaiian’s subsidiary has now reduced its offer for the remaining assets even further to $100,000, according to a motion filed Friday by Elizabeth Kane, the trustee overseeing the Chapter 7 liquidation. The trustee is asking the court to proceed with only the stock sale at Friday’s 10 a.m. hearing. Other bidders still could come in before the hearing and raise the offer for the operating certificate.

Hawaiian is seeking to secure the operating certificate so that its new subsidiary can oversee turboprop carrier ‘Ohana by Hawaiian rather than have the operation contracted out to Idaho-­based Empire Airlines as it is now.

Bankruptcy Judge Robert Faris gave preliminary approval to the sale Dec. 19.

The trustee is also asking now that a sale of the remaining assets be scheduled for a hearing date two weeks after Friday’s hearing so that competing bidders can reassess the purchase opportunity for the assets.

Separately, U.S. Trustee Tiffany Carroll said in another motion Friday that reconverting the Chapter 7 case to a Chapter 11 reorganization to sell the operating certificate may be problematic, and if the reorganization plan cannot be confirmed, creditors would be better off with the case being dismissed now.

“The requirement to pay all these expenses presents a considerable hurdle for the Chapter 11 plan process,” Carroll said. “The unfortunate reductions in the purchase price due to some of the parts apparently being leased or having been sold pre-petition (before bankruptcy) would seem to leave this overall plan with an even thinner margin.”