The bankruptcy case filed by one of its longest tenants, Freedom Air, caught the Commonwealth Ports Authority by surprise when the company formally filed for Chapter 11 protection on Sept. 30, just days after the CPA board of directors decided to give it a 90-day reprieve on its debt.
The local carrier filed the Chapter 11 petition before the U.S. Bankruptcy Court for the District of Guam on Sept. 30. It listed an estimated 50 to 99 creditors and assets of about $1 million to $10 million, equivalent to its declared estimated liabilities. Under Chapter 11, Freedom Air has 120 days to reorganize itself and after four months, it is expected that the CPA board will render a new decision.
CPA first issued a 30-day termination notice to Freedom Air in August as a result of the company’s unpaid obligations to CPA totaling $1.23 million. The $1.23 million represents unpaid obligations for both lease agreement and airline use agreement.
Based on this decision, the company was supposed to vacate airport premises on three islands by Sept. 19. But a day before this deadline, the CPA board issued a new order—this time providing the company a 90-day reprieve.
Prior to the CPA board’s decision in August, the ports authority had already given several chances for the Freedom Air to rectify its long overdue accounts. In fact, several notices of default, termination and promissory notes were issued to the company since 2011, a demonstration of the opportunities extended by the ports authority to the local carrier.
On Sept. 24, 2012, CPA served the company its first notice of termination of promissory notes, lease agreements and airline use agreement, and notice to vacate premises. Despite this notice to terminate and vacate, an extension was granted to Freedom Air, yet again, to cure the defaults.
In June, Freedom Air officials led by owner and founder Joaquin Flores appeared before the board seeking forbearance on its outstanding account and arrears. The Legislative Delegation also appealed to the board in support of the airline’s plight.
Because of the Chapter 11 bankruptcy, it’s status quo for Freedom Air. As for CPA, no action can be taken on the issue until the court rules with finality on the case.