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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