The trustee overseeing the Chapter 11 bankruptcy cases of Silver Airways and its affiliate Seaborne Virgin Islands has filed a motion to dismiss the cases because there is little chance the companies will succeed.
U.S. Trustee Mary Ida Townson filed the motion Thursday in the United States Bankruptcy Court for the Southern District of Florida in Fort Lauderdale, citing “fanciful projections that fail to take reality into consideration.”
According to Townson, while Seaborne and Silver have a fleet of 16 aircraft and the value of their property totals almost $90 million, their property “is completely encumbered by the liens of their secured creditors,” totaling $400 million. Additionally, they owe $8 million to various taxing authorities and $27 million to general unsecured creditors, according to the filing.
Moreover, they are paying out more money than they are generating, suffering net losses of $467,000 in February and $1.2 million in the first two weeks of March, and were projecting further net losses of $1,243,000 for the latter half of March, it states.
“The Debtors stated in their February 2025 operating reports that the Debtors’ losses since the petition date total $32,037,908; it appears neither Silver Airways nor Seaborne have been profitable since the petition date,” according to the motion.
Silver and Seaborne filed for bankruptcy protection in December via separate petitions, citing a need to restructure their finances and secure additional capital. The move came six years after Seaborne voluntarily reorganized in 2018 and announced it had secured a new $4.2 million credit facility and entered into a purchase agreement with Silver.
The airlines provide a critical link between St. Croix and St. Thomas and also serve the wider Caribbean region, with Silver headquartered in Fort Lauderdale, Florida, and Seaborne in San Juan, Puerto Rico.
According to Townson’s motion, the airlines have advised the court “that no agreement was reached with respect to several lessors under § 1110, and that the Debtors did not intend to cure and perform as required by the statute in the absence of an agreement,” referring to provisions of bankruptcy law that allow a secured lender to reclaim their assets.
“The Debtors, did, however, file emergency motions to approve certain § 1110 agreements reached with several lessors, which resulted in Debtors continuing leasing arrangements for 7 aircrafts,” the motion states. They also have attempted to obtain post-petition financing “but have yet to file any motion or document related to approval of such financing,” it says.
Given those issues, there is cause to dismiss because of a “substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation,” the motion states.
Beyond the stated continued losses since they filed their bankruptcy petitions, “claims for post-petition administrative expenses filed by creditors, such as the claims of World Fuel Services, Inc., totaling $639,600, and Monroe County, totaling $83,758, indicate that there are additional administrative expenses beyond what the Debtors have projected, and that these jointly administered estates may already be administratively insolvent,” it says.
“Notably, no applications for compensation have been filed, which will add an additional layer of administrative expenses in unknown amounts,” the motion states.
Additionally, it appears unlikely that they will be able to secure financing, Townson said.
“Here, the Debtors have attempted but been unable to secure debtor in possession financing that would dovetail into a sale of the Debtors’ assets. Though there is no doubt concerning the Debtors’ efforts to obtain such financing, the lack of any motions or documents filed proving that financing is on the horizon clouds any prospect of a reasonable likelihood of rehabilitation. Without any concrete evidence that there will be financing in the immediate future, there is no reasonable likelihood that the Debtors will be able to successfully rehabilitate,” the motion states.
Further, “the Debtors’ recent projections belie realism. While the Debtors may have been able to project and earn weekly receipts exceeding $2,000,000 for prior periods, the Debtors do not appear to consider that their fleet size is significantly reduced by half, and that such reduction will similarly reduce, if not hamstring, the Debtors’ already-negative cash flow, furthering proving the lack of a reasonable likelihood of rehabilitation,” it says.
In addition, the airlines’ projected receipts from April 14, 2025, to April 18, 2025, are $900,000 more than they initially projected for the period in their seventh interim budget and are equal to 28.2% of their total receipts for February 2025. “The Debtors’ projections, while rosy, seem unrealistic and designed to avoid ending any week a negative cash balance,” according to the motion.
It is more than likely that Silver and Seaborne’s future receipts will substantially decrease because of the reduction in their fleet, “which further demonstrates to a showing that there is an absence of a reasonable likelihood of rehabilitation,” said Townson in calling for a dismissal.
Judge Peter D. Russin had not ruled on the motion as of Thursday evening.
