MINNEAPOLIS (AP) âÄî Sun Country Airlines filed for Chapter 11 bankruptcy on Monday, just days after the founder of its parent company, Petters Group Worldwide, was charged in a multimillion dollar fraud investigation. Sun Country plans to continue operating on its normal schedule, airline Chairman and CEO Stan Gadek said Monday. âÄúIt feels like itâÄôs (the Chapter 11 filing) put us back in control of events whereas in the last week and a half events have been controlling us. Now we can get the company back on track here,âÄù Gadek told The Associated Press. Last week, Gadek said Sun Country was having cash flow problems and couldnâÄôt turn to its parent company for a short-term loan âÄî as it normally would during the slow travel period âÄî because of the federal investigation. âÄúWe were forced to take this action as a result of recent events at Petters Group Worldwide,âÄù Gadek said in a statement Monday. Petters Group founder Tom Petters faces federal charges of mail fraud, wire fraud, money laundering and obstruction of justice in what authorities say was a years-long scheme to defraud investors of more than $100 million. Court documents indicate as much as $3 billion might be tied to the fraud. Petters, who is in custody, resigned before his arrest last week. An attorney for Petters, Jon Hopeman, has said Petters denies wrongdoing. Petters Group became the sole owner of Sun Country last November, after co-owning the carrier since October 2006. Separately Monday, federal judge Ann Montgomery froze the assets of Petters Group and several entities, saying: âÄúThere is probable cause to believe that the amount traceable to certain of the DefendantsâÄô fraudulent activities is at this time $3 billion.âÄù Montgomery appointed attorney Doug Kelley as receiver to run the entities. Gadek said by filing Chapter 11, Sun Country will avoid going into receivership. Ray Neidl, a stock analyst with Calyon Securities Inc., said heâÄôs not surprised by Sun CountryâÄôs Chapter 11 filing in these times of high fuel prices and uncertain credit markets. Neidl said roughly a half-dozen small airlines filed for bankruptcy last spring, and he saw Sun Country as one of the smaller, private carriers that would do the same in the fall. The filings in U.S. Bankruptcy Court in Minnesota are for Petters Aviation LLC and its subsidiaries, including MN Airlines Inc., which does business as Sun Country Airlines. The documents show that Petters Aviation has at least $38.4 million in unsecured claims, while MN Airlines has unsecured claims of at least $3.62 million. In an interview on WCCO-AM, Gadek said it was âÄúbusiness as usualâÄù at the airline and customers wouldnâÄôt see a difference. He said he had been involved in two other bankruptcies but said Sun CountryâÄôs is different because itâÄôs not âÄúas a result of a broken business model.âÄù Gadek said the airline was profitable in July and August. Asked whether he had been pursuing outside capital, Gadek said he had spent most of his time since the Petters investigation broke into public view negotiating with vendors for flexibility to get through the next 90 days. But vendors didnâÄôt want to get involved because of concern about litigation, he said. The Chapter 11 filing âÄúallows us to stand on our own, uncouple from the organization and move forward,âÄù he said. Sun Country warned its employees on Thursday that they should be prepared for potential major layoffs or even a shutdown as early as Dec. 1. But the airline said it issued that letter to comply with legal requirements, and that it has no plans to shut down or slash its work force.
Sun Country files for bankruptcy protection
Published October 6, 2008
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