BACKGROUND: Cirrus began experiencing financial problems about three years ago as the general aviation industry declined in the face of the downturn in the national and international economies. As a result, Cirrus was unable to make its Growth Fund lease and loan payments, and it sought to restructure them to lessen the stress on its cash flow while it waited for its market to recover. Then last June Cirrus merged with China Aviation Industry General Aircraft Co., Ltd. (CAIGA) making it possible to pay the Growth Fund nearly $3,277,000 for past due rent and loan payments and redemption of common stock.
Despite the merger, Cirrus remained unable to pay its $73,854 monthly lease and loan payments. There were generally two reasons for this: (1) CAIGA expected neutral to positive cash flow for operations and would inject “new cash” only to pay vendors who would accept discounted payments; and (2) the general aviation market had yet to recover sufficiently to improve the cash flow requirements of Cirrus’ new owners.
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