CargoLogicAir Ltd - case update

David Buchler and Joanne Milner of Buchler Phillips, the Joint Administrators of CargoLogicAir, have released a report updating stakeholders on the progress of the administration.

We last wrote about CargoLogicAir in January, when we described the events leading up to the Joint Administrators’ appointment, including the company’s inability to operate flights in the EU and US airspace after the imposition of sanctions on the company’s ultimate beneficial owner, as well as Citibank’s decision to close the company’s only operational bank accounts despite the fact that the company had a licence authorising it to make payments in relation to its basic needs and for its prior obligations.

We also described how the Joint Administrators expected to realise sufficient funds to pay all creditors in full, but were experiencing various issues related to this as a result of the sanctions, and how they intended to make an application to the Court for directions as to how to effect a distribution to creditors unaffected by the UK sanctions regime.

In their most recent report, the Joint Administrators have provided an update on their efforts to open a bank account. Citibank had previously agreed to transfer the company’s funds to a designated bank account when it has been set up. The Joint Administrators had understood that a bank account would be set up with the Insolvency Service’s banker’s NatWest prior to their appointment. However, NatWest initially changed their stance and refused to deal with sanctioned funds.

After exploring other bank accounts, the Joint Administrators found that the UK banks do not have the risk appetite to accept sanctioned funds, but OFSI would not grant authorisation for their transfer to a non-UK regulated bank. As a result, the Joint Administrators have been speaking with the Insolvency Service, legal advisors, other Insolvency Practitioners with similar banking issues of sanctioned assets, R3 as the insolvency profession trade body, Government officials and banks to reach a solution.

NatWest recently confirmed that they will allow the company’s funds to be held in a separate Insolvency Service Account. The Joint Administrators are in discussions with NatWest and will notify creditors and employees once they are in a position to make payments.

The Joint Administrators also provided an update on their efforts to realise the company’s assets. It is unlikely that the Company will be sold as a going concern. The Joint Administrators have been in contact with several parties interested in acquiring the company’s stock, including B747 aircraft parts. However, they require specialist documentation stored on the Trax aircraft maintenance system used by the company before the stock can be sold. CargoLogicAir has been blocked from accessing Trax due to unpaid invoices, and the Joint Administrators can’t pay the invoices due to delays in the creation of a new bank account.

The Joint Administrators currently anticipate that a distribution will be available to the unsecured creditors and that the company will enter into Creditors’ Voluntary Liquidation to facilitate the payment of a dividend to the unsecured creditors.

The progress report can be found HERE. They have been assisted by Buchler Phillips, DLA Piper, Rabin Kok of South Square Barristers and Adam Al- Attar of South Square Barristers in respect of legal matters, and Lambert Smith Hampton in respect of valuation and disposal advice.