The US Bankruptcy Court has approved the immediate entry of USD5.5 million debtor-in-possession (DIP) funding provided to Silver Airways (3M, Fort Lauderdale International) by KIA II LLC, an affiliate of Wexford Capital, and scheduled an auction to sell the regional carrier for May 28, 2025.

Judge Peter D Russin confirmed on May 15 that the airline was in immediate need of the DIP funding "to maintain business relationships with their vendors, suppliers, and customers, to pay their employees, and otherwise finance their operations." He also found the airline had no more favourable offer at hand.

This follows the earlier tentative approval of the funding in late April. The funding will allow Silver Airways to continue operations and preserve the value of the company until its proposed sale and exit from the ongoing Chapter 11 restructuring.

"In the absence of the availability of such funds and liquidity in accordance with the terms hereof, the continued operation of the debtors’ businesses would not be possible, and serious and irreparable harm to the debtors and their estates and creditors would occur," the judge argued.

In early May, the airline received a USD5.775 million stalking horse (meaning placed before the action actually begins) credit bid from KIA II LLC. The transaction would be executed through the cancellation of the post-petition DIP debt provided to Silver Airways by KIA II LLC.

Other interested potential buyers have until May 25 to register for the auction, to take place on May 28. The court expects to hold a sale hearing confirming the outcome of the auction on June 4.

The auction will cover both Silver Airways and its subsidiary Seaborne Airlines, although the stalking horse bidder is solely for Silver Airways. The carrier has been in separate investor negotiations for the sale of its Puerto Rican subsidiary and had an offer for USD3.75 million in cash, but the court order reveals the deal fell through due to a lack of deposit.

The restructuring is likely to result in the cancellation of a substantial portion of Silver Airways' pre-Chapter 11 debt. The airline disclosed a secured debt of USD399.3 million to Brigade Agency Services and Argent Funding, but The Street reported that its total liabilities at the time of the Chapter 11 filing exceeded USD500 million. Russin previously expressed reservations about approving restructuring that would leave most of the creditors hanging with millions in unpaid debt.

"It is not lost on the court that the debtors borrowed collectively several hundred million dollars, yet the contemplated asset sale values total at present less than USD10 million. But the debtors assert the payment-in-kind interest charged by the prepetition lenders [Brigade and Argent] has much to do with the disparity. In any event, as with many bankruptcy cases, the facts are stubborn and are what they are," the court said in a May 19 order finalising the DIP financing approval.

Lessors owed money by Silver Airways, including Azorra, Jetscape, Nordic Aviation Capital, and TrueNoord, supported the plan as the only viable way of recovering money, albeit they accepted they were likely to be repaid in less than full.

On June 24, the court will hear the petition of the US Trustee, which moved to dismiss the bankruptcy entirely, arguing that it showed "an absence of a reasonable likelihood of rehabilitation."