Newspaper article The Canadian Press

Export Development Canada Owed US$690 Million as Largest Pinnacle Creditor: EDC Owed US$690M in Pinnacle Bankruptcy

Newspaper article The Canadian Press

Export Development Canada Owed US$690 Million as Largest Pinnacle Creditor: EDC Owed US$690M in Pinnacle Bankruptcy

Article excerpt

MONTREAL - Export Development Canada says it is in a "good position" even though it is owed US$690 million as the largest secured creditor after U.S. regional carrier Pinnacle Airlines Corp. filed for bankruptcy protection.

The Crown corporation, which provides loan guarantees or direct financing to help companies purchase Bombardier Inc. planes, has helped finance Pinnacle's purchase of 44 aircraft from the Montreal-based company (TSX:BBD.B).

Pinnacle, which filed for bankruptcy late Sunday, mostly flies between major airports in the East and has been hurt by rising costs and integration problems.

Pinnacle has 28 of Bombardier's Q400s in operation for United Airlines and 16 of its CRJ 900 regional jets in operation for Delta.

The turboprops are being transferred to another undisclosed United operator while the Delta contracts covering 140 50-seat CRJ200 aircraft and the larger CRJ900 have been extended until early 2013.

The agency agreed about three months ago to help give Pinnacle some breathing room by allowing it to defer a regular payment until April.

"What we've seen today puts us in a good position," said EDC spokesman Phil Taylor.

Taylor said the bankruptcy filing won't deter the agency from funding further aircraft sales.

"This is pretty much part and parcel of dealing in the airline industry, whether it's in North America or in Europe, you are going to have some suppliers that the contracts will change or they'll struggle to make a go of it," he said in an interview.

"If there's still demand out there, then I think we're still pretty comfortable doing that."

Pinnacle flies under contract for Delta, United-Continental and US Airways.

The Memphis, Tenn.-based airline said late Sunday its current business model isn't sustainable. It had tried for months to blend its operating subsidiaries to save money and recover from lost business with major airlines due to flying cutbacks.

In its filing, it lists $1.42 billion in debt and $1.54 billion in assets. It ended the third quarter -- the most recent quarter for which financial results are available -- with just $81.8 million in cash and cash equivalents.

It plans to wind down the United Express flights it operates for United Continental Holdings Inc. It will continue Delta Connection flights for Delta Air Lines Inc. It's already in the process of winding down its service with US Airways.

Pinnacle's Colgan Air subsidiary operated a plane that crashed into a home near Buffalo, N.Y., in 2009, killing 50 people. It was operating under the banner of Continental Connection. With the termination of contracts with US Airways and United, Pinnacle will end flying at Colgan Air.

The airline lost $8.8 million in the first nine months of 2011 in contrast to a profit of $17 million in the same period a year earlier. Revenue improved in that time, but costs accelerated at a faster pace. …

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