777’s Bonza funding ‘sporadic, delayed, insufficient’: administrator

Hall Chadwick argued in its report to creditors that funding from the Miami-based investment firm, on which Bonza relied to keep operating, was “not sufficient to meet the company’s operational requirements”.

The document released on Tuesday night concluded the low-cost carrier, which has been grounded since April, accumulated a loss of more than $133 million and recommended it be wound up.

“The Company did receive loan funding from 777 Partners amounting to $77,865,264. However, the funding advances from 777 Partners were paid sporadically, delayed and were ultimately insufficient for the level of funding required to adequately maintain the Company’s operations,” the administrator wrote ahead of a second creditors’ meeting.

“Whilst 777 Partners did provide funding, the funding was insufficient for the level of debt incurred, which continued to increase, particularly from November 2023 to the date of our appointment.”

In a statement to creditors as part of the report, CEO Tim Jordan and CFO Lidia Valenzuela, both local directors of the collapsed airline, also appeared to lay blame at the feet of Bonza’s parent company, accusing it of underfunding the business.

“Bonza was wholly reliant on funding from our sole investor 777 Partners. Although there was no feedback that funding had ceased, our ongoing and progressing execution plans were curtailed abruptly on the 30th April 2024 with the repossession of our aircraft,” they said.

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“With the positive momentum in the business up until that time, coupled with maturing markets and additional fleet growth, Bonza was progressing positively towards being cash positive late in 2024.

“Unfortunately for our Bonza team, our customers, our partners and the communities we serviced across Australia, that didn’t get an opportunity to come to fruition owing to the under capitalisation of the business and the consequential repossession of our aircraft.”

Hall Chadwick has also suggested that Bonza may have been trading while insolvent, claiming directors were possibly continuing to accept bookings and incur debts on behalf of the company despite not knowing whether Bonza had adequate funding to keep flying.

In particular, the administrator alleged that US-based directors Steve Pasko and Adam Weiss, who were “at all relevant times, directors and key management personnel of 777 Partners” at the same time as being directors of Bonza, may have been privy to additional information regarding 777’s investment decisions and the potential cancellation of leases, and owed fiduciary duties both to Bonza and 777.

“These dual duties created a situation of conflict for Messrs Pasko and Weiss, where the interest of the Company was to continue to be in possession of the Aircraft to continue the Company’s operations, whereas for 777 Partners, it appeared to be to terminate the funding of the Company and the lease agreements,” the administrator wrote.

“Based on documents reviewed by the administrators, it appears that from at least 22 March 2024, 777 Partners had resolved to cease funding the company and take steps to take the aircraft from the possession of the company.

“Further documents appear to disclose that 777 Partners and the lessors had taken preparatory steps towards the re-leasing of the aircraft to a party other than the company, before the leases had been terminated.”

The report also noted that Jordan and Valenzuela had provided information and assistance to the administrators, while Pasko and Weiss had not.