Gemini Air Cargo files Chapter 11 bankruptcy, plans to sell assets

By Caroline Salls

Pittsburgh, June 19 - Gemini Air Cargo, Inc. filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the Southern District of Florida with plans to sell substantially all or a portion of its assets.

In connection with the bankruptcy filing, Gemini has obtained a commitment for $13.7 million in debtor-in-possession financing from Laurus Master Fund, Ltd.

The DIP facility will accrue interest at 15%.

The loan will terminate on the earliest of July 7 if a final order has not been entered, the effective date of a plan of reorganization, upon completion of a sale of the company's assets and the dismissal or conversion of the bankruptcy case or appointment of a Chapter 11 trustee or examiner.

The DIP agreement requires the company to obtain court approval of the asset sale bid procedures by June 27, to obtain approval of the sale by Aug. 11 and to close the sale by Aug. 13.

Gemini is requesting interim access to $4.57 million of the DIP financing.

The company listed $100 million to $500 million in both assets and debt.

Gemini's largest unsecured creditors include MTU Maintenance Hannover GmbH, Langenhagen, Germany, with a $3.56 million vendor claim; Defense Finance and Accounting, San Antonio, with a $1.71 million vendor claim; and KLM, Amsterdam, with a $1.21 million vendor claim.

Under the procedures for the proposed asset sale, bids are due by noon ET on Aug. 8, and all bids must include a 10% deposit of the proposed purchase price.

The company said it has not secured a stalking horse bid.

However, Gemini is seeking court approval to pay a 2% break-up fee and reimburse up to $200,000 of expenses to a stalking horse bidder if the company selects a stalking horse bid later. The break-up fee and expense reimbursement would be paid if the stalking horse bidder is not the high bidder at auction.

The auction will be held Aug. 11, starting with either a stalking horse bid or the highest bid received. Subsequent bids at auction must be for at least $100,000 more than the previous bid, plus the amount of any break-up fee and expense reimbursement.

According to court documents, this is Gemini's second bankruptcy filing in two years. The company emerged from its previous bankruptcy case in August 2006.

Since then, the company said it has suffered revenue shortfalls that prompted the latest filing.

Pilot response

The Gemini Air Cargo pilots, represented by the Air Line Pilots Association International, responded to the bankruptcy filing in a Thursday news release.

"We are very surprised by the bankruptcy announcement," Gemini ALPA unit chairman Bill Atchison said in the release, "and we are also very troubled by the additional news that 75 crewmembers were terminated or furloughed."

"The furloughs were done in direct violation of Section 23 of our current contract, and we will take whatever steps are necessary to protect the rights of those pilots affected.

"However, we remain optimistic that these cost-saving measures are necessary during this financially turbulent time to re-position the company as an attractive opportunity for prospective investors."

Gemini is a Dulles, Va.-based air cargo carrier. Its Chapter 11 case number is 08-18173.

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