Photo: Hilaire Bule
Air Vanuatu could be set to enter into an agreement with a new entity owned by the country's Ministry of Foreign Affairs.
Ernst and Young Australia has finished its revised report on Air Vanuatu, recommending a creditors' compromise which was set to go to a vote on Wednesday.
This is a legal arrangement where a proposal for a compromise of the debts owing to creditors is put to a vote of the company's creditors.
A creditors' compromise proposal may include an offer to pay a portion of the outstanding debt owed, and may involve concessions from creditors, such as agreeing to accept less than the full amount owed, or extending the payment period to allow the company more time to pay.
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The list of Air Vanuatu's creditors is long, and total creditors' claims - including unsecured creditors' claims - run to US$124.57 million.
An entity called AV3, which is wholly owned by the Vanuatu Ministry of Foreign Affairs and which was incorporated on 5 June, has put forward the proposal.
"Without providing any commitment at this stage, it is our understanding that should creditors approve the proposed creditors compromise, AV3 intends to enter into arrangements with third parties who have expressed interest in funding the business of the company to support the business into the future," the liquidators wrote in their report.
It is a Vanuatu government entity, "and for that reason it is likely to have the financial capacity to complete the proposed recapitalisation and fund the recommencement of services".
Under the proposal, AV3 will contribute US$3.3m into a fund established pursuant to the terms of the creditors compromise proposal in three parts.
"Once the creditor compromise fund has been distributed to affected creditors, the company shall be released and discharged from all creditor claims (other than those that have been specifically identified as not being compromised by the creditors compromise)," the liquidators wrote in their report.
But it has been criticised by one creditor in particular - former pilot Charles Perry.
In an email to Ernst & Young, he wrote: "EY is proposing and pushing for a recapitalisation proposal from AV3, a newly formed government entity. We are told this is the best outcome for creditors, but I believe this is far from the truth."
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One of Perry's major concerns is the involvement of AV3, which he suspects will be managed by the same board and directors who were in charge during Air Vanuatu's financial downfall.
He said this raises serious doubts about whether the airline can be successfully turned around.
In the event the creditors approve AV3's compromise, the liquidators would make an application to the Supreme Court of Vanuatu seeking an order that the liquidation of the company be terminated.
"The creditors' compromise will achieve a going concern outcome for the company which preserves the company's business, maintains staff employment where possible and mitigates against the crystallisation of contingent creditor claims," the report said.
The report said if creditors determine they do not wish to approve the creditors' compromise, the liquidation will continue - with the closure of operations, the realisation of available assets and distribution of proceeds to creditors.