Creditors watch Evergreen International Airlines for potential closure this week

Creditors seeking millions of dollars from McMinnville-based Evergreen International Airlines Inc. are watching to see what happens Saturday, when the company might shut its doors for good.

Company officials weren’t commenting this week on uncertainty surrounding the cargo airline, whose managers told the state they’d shut down – but whose founder maintains the business will stay open.

Claims are piling up against Evergreen for everything from back taxes to unpaid aviation fuel bills. Lawyers representing creditors are bracing for a potential Chapter 7 bankruptcy filing, which would block lawsuits and appoint a trustee for orderly liquidation.

“That would be bad for us if they do file bankruptcy,” said Robert Kruckemeyer, a Houston attorney representing Associated Energy Group Inc., a Texas fuel supplier seeking $191,752.12 for unpaid invoices. “You just have to get in line, and you try to jockey for a better position.”

Privately held Evergreen, a major Yamhill County employer, has operated since 1974, at one time fielding a worldwide fleet of Boeing 747 cargo jets and earning hundreds of millions of dollars in annual revenue. But the company has always lived on a steady diet of loans, so expiring military contracts and a slowing commercial cargo market left it scrambling for cash to cover obligations.

Chief executive Delford Smith, founder of several Evergreen companies, issued a statement Nov. 8 dismissing news of the company’s demise as false rumors. He has not returned repeated phone calls for comment.

Some of the suits against Evergreen name Smith as a defendant, raising the question of whether the 83-year-old company owner can insulate himself from claims. Smith’s continuing financial support has been crucial for Evergreen’s nonprofits, which include the Wings & Waves Waterpark and the Aviation & Space Museum.

Managers of the popular attractions across Oregon 18 from Evergreen’s corporate headquarters insist they will stay open. The Oregon Department of Justice is investigating allegations of commingling funds between Evergreen’s profit and nonprofit arms.

Judgments against Evergreen include two for overdue contributions to its pilots’ pension plan. Last summer a Yamhill County judge granted the judgments for $744,651 and $680,359 against the airline. Representatives of the Air Line Pilots Association union say the amounts, due in May and August, have not been paid.

“It’s a shame to see this happening,” said pilot Bill Fink, a former union officer furloughed in 2012. “I don’t know if we’ll ever know the reasons why the company did not reinvest in itself.”

Fink and other pilots said they began noticing problems in 2011, when they’d arrive at hotels abroad after long flights, only to have their company credit cards denied. They’d call headquarters, where managers would try to get them to use their personal credit cards before coughing up a valid card number.

Pilot Dean Kidd said he began noticing problems four or five years before he retired in 2012.

“You could almost see that Del Smith’s heart wasn’t in it any longer,” Kidd said. “It seemed that all of his attention was directly across the street there at his legacy.”

Kidd said the airline has gone from a high of more than 450 pilots in the 1980s to perhaps fewer than 30 today.

Kidd used to fly one of Evergreen’s lucrative routes during the 1990s, departing from New York full of cargo for Australia via Chicago, Los Angeles, Honolulu and Pago Pago. The empty freighter would depart Sydney, Melbourne or Auckland for Hong Kong, where it would load to the gills with U.S.-bound freight. It would hop from Japan or Russia to Anchorage for fuel, then back to New York via Columbus or Chicago.

Evergreen also flew round-the-world flights, departing from Charleston or Dover Air Force Base with U.S. military cargo, stopping in Germany at Ramstein Air Base or Hahn, and from there to Incirlik, Turkey. At that point the flights would become commercial, departing for Shanghai via Kazakhstan or Kurdistan and loading Chinese cargo bound for New York via Japan, Anchorage and Chicago.

But Evergreen lost contracts, including the Australia route and high-profile Dreamlifter flights carrying parts for Boeing 787 factories, to competitor Atlas Air Inc. Soon Evergreen became a bottom feeder, competing for overflow Atlas cargo such as Humvee armor bound for Iraq and Afghanistan.

As income declined, Evergreen had trouble paying off leases and loans. The airline at one point owed more than $1 million to Hartford Aviation Group, which leased Boeing 747 engines to the company, according to Thomas Anderson, an attorney representing Hartford.

Hartford went after Smith, who had personally guaranteed a payment plan. On Nov. 14, Smith paid Hartford the outstanding balance of $431,000, using proceeds from farm property he sold, Anderson said.

Smith is named as a defendant along with his companies in other suits, such as a $10 million claim by 1st Source Bank of Indiana, for loans made by the bank. 1st Source made Evergreen fork over collateral in the form of a Learjet and seven helicopters.

On the home front, Smith and his wife, Maria, were sued this year by two former domestic-service employees who claimed the couple failed to pay them minimum wage for long shifts during several years of work. The parties settled out of court last week.

Anderson, the lawyer representing Hartford, believes Smith is doing everything he can to save Evergreen International Airlines. “But they’re just buried in debt, I think,” Anderson said.
 
Times have changed since 1996, when Smith’s legal and financial advisers recommended he file Chapter 11 bankruptcy for the airline after it defaulted on $125 million in junk bonds. Back then, Smith, 67, hired another lawyer who helped convince bankers to loan Evergreen $400 million, saving the company. 

Anderson said that isn’t likely this time. But at this point, a Chapter 7 bankruptcy filing might not mean much, either, given that the airline apparently leased its equipment and owned little or no property.

“If all their planes are gone and their income streams are gone, the bankruptcy wouldn’t have any assets,” Anderson said. “So it may not be worth it to anybody to go through bankruptcy, because if there’s no assets the creditors won’t get paid anything.”

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