Private investment firm buys manufacturer in forced sale, taking on debt of over $21 million

Mooney Airplane has been sold to a private investment firm in the latest dramatic turn in the general-aviation manufacturer's turbulent recent history.

Mooney Aerospace Group (MASG) was forced to sell the aircraft manufacturer to Allen Holding Finance after its secured debenture holders declared the company was in default on their $21 million in notes. The sale was hastened by a Los Angeles court judgment upholding the award of almost $24 million in damages against Mooney for terminating the lease on its former headquarters in Long Beach, California.

The sudden sale closes a bizarre chapter in Mooney's chequered history. After filing for bankruptcy protection in July 2001, it was rescued from Chapter 11 in April 2002 by Advanced Aerodynamics & Structures (AASI), a company that had failed to bring its JetCruzer turboprop single to market after years of development and millions in investment. AASI then changed its name to Mooney Aerospace Group, abandonedthe JetCruzer and pledged its stock in wholly owned subsidiary Mooney Airplane to the noteholders who had backed the firm when it was AASI.

When the holders declared their notes in default, MASG had no choice but to sell the aircraft company, says president Nelson Happy. Known as an aggressive investor, Allen has agreed to assume all the debt owed to secured debenture holders - more than $21 million, most of it incurred by the former AASI, he says. Allen has also agreed to invest $4 million in new capital in Mooney Airplane. This will allow the Kerrville, Texas-based manufacturer to achieve its business plan, says chief operating officer Barry Hodkin. Mooney plans to sell 76 aircraft this year - more than double its 2003 total.

After MASG halted all work on the JetCruzer in 2002, it terminated the lease on the former AASI plant in Long Beach. Landlord AP Long Beach Airport filed a claim against MASG and in early May an arbitrator awarded the airport almost $24 million in damages. MASG argued the arbitration was non-binding, but on 28 May the Los Angeles County Superior Court upheldthe award.

The sale of Mooney Airplane to Allen leaves MASG - now just a shell - with liability for the damages. The company may appeal, says Happy, adding: "It has no way to pay."

GRAHAM WARWICK / WASHINGTON DC

Source: Flight International