The United States Trustee has filed a motion to dismiss the bankruptcy cases of Silver Airways and its affiliate Seaborne Virgin Islands, Inc., citing substantial ongoing losses exceeding $32 million and an absence of reasonable likelihood of rehabilitation for the regional carriers. The motion, filed April 10 in the Southern District of Florida Bankruptcy Court, describes the airlines' financial projections as "fanciful" and "unrealistic" as the carriers struggle with a fleet that has been cut in half.
Mary Ida Townson, the U.S. Trustee for Region 21, asserts in the nine-page filing that the jointly administered Chapter 11 cases should be dismissed under Section 1112(b)(4)(A) of the Bankruptcy Code due to "substantial and continuing loss to the estate shown by the Debtors' net negative profits and negative cash flow," coupled with the debtors' failure to secure post-petition financing despite ongoing attempts since their December 30, 2024 filing.
"Despite the Debtors' optimistic projections for April 2025, it is more than likely the Debtors future receipts will substantially decrease because of the reduction in the Debtors' fleet, which further demonstrates... that there is an absence of a reasonable likelihood of rehabilitation," wrote John Schank, attorney for the U.S. Trustee.
The Fort Lauderdale-based carriers, which primarily serve Florida and the Caribbean, entered bankruptcy with a fleet of 16 aircraft consisting of 14 ATR-600 series aircraft and two DeHavilland Twin Otter Seaplanes. However, by February 27, 2025, the airlines advised the court that no agreements had been reached with several aircraft lessors under Section 1110 of the Bankruptcy Code, which governs aircraft equipment and vessel leases. The airlines subsequently arranged to continue leasing only seven aircraft, effectively cutting their fleet by more than half.
Financial data presented in the motion paints a grim picture of deteriorating operations. While the airlines showed slightly positive cash flow of $238,000 from the petition date through March 14, 2025, they recorded net losses of $467,000 in February 2025 and $1.22 million in just the first two weeks of March. The carriers' own projections anticipate further losses of $1.24 million for the latter half of March.
According to bankruptcy schedules, the airlines valued their property at nearly $90 million on the petition date, but those assets are "completely encumbered" by secured creditors holding approximately $400 million in debt. The companies also owe roughly $8 million to tax authorities and $27.7 million to unsecured creditors.
The U.S. Trustee argues that the debtors have suffered "substantial and continuing losses" since at least February 1, 2025, with total losses since the petition date exceeding $32 million according to the airlines' own operating reports.
Of particular concern to the Trustee is the airlines' apparently unrealistic financial projections. The motion notes that despite the drastically reduced fleet, the debtors are projecting receipts from April 14-18, 2025, that are "$900,000 more than the Debtors initially projected for such period in their 7th interim budget and are equal to 28.2% of the Debtors total receipts for February 2025."
The motion further indicates that administrative claims already filed by creditors, such as a $639,600 claim by World Fuel Services, Inc., and an $83,758 claim by Monroe County, suggest "that there are additional administrative expenses beyond what the Debtors have projected, and that these jointly administered estates may already be administratively insolvent."
Rather than converting the case to Chapter 7 liquidation, the U.S. Trustee seeks outright dismissal, arguing it would be in the best interest of creditors given that the debtors' assets are fully encumbered and the cases appear to be administratively insolvent.
The case, numbered 24-23623-PDR, is pending before the United States Bankruptcy Court for the Southern District of Florida in Fort Lauderdale. The U.S. Trustee is represented by John Schank of the Office of the United States Trustee in Miami.
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