Easy Come, Easy Go? Trustee Goes After Loan Repayments Made to Allegheny County Authority by Bankrupt Airline

Mar. 30—Several months before being forced into bankruptcy in 2018, OneJet made two repayments on $1.5 million in loans it received from the Allegheny County Redevelopment Authority.

Three years later, the trustee in the bankruptcy case involving the regional business carrier is going after repayments totaling $35,028 made to the authority, which is fighting the claim.

The dispute represents another episode in the drawn-out saga involving the airline, which touched down in Pittsburgh in 2015 touting a big plan to offer business travel to secondary markets like Indianapolis and Milwaukee no longer served by major carriers.

Advertisement

The strategy not only won the backing of the redevelopment authority and the state, which loaned OneJet $415,286, but the county's airport authority, which gave the airline $1 million in subsidies.

It also attracted investments from three airport authority board members, local CEOs, retired bank executives, business people, and others who longed for access to secondary markets.

In the end, the plan fizzled.

OneJet stopped flying from Pittsburgh International on Aug. 29, 2018. Three months later, a U.S. bankruptcy judge in Pittsburgh granted a petition filed by a group of creditors to force OneJet into an involuntary Chapter 7 bankruptcy.

Advertisement

At the time, the airline listed no financial assets, no real estate, and an unknown amount of business-related property and vehicles. In one filing, it detailed $43.9 million in liabilities, all but a fraction of which represented non-priority unsecured claims involving nearly 250 creditors.

In the years since, Rosemary Crawford, the Chapter 7 trustee in the case, has been methodically trying to recover whatever money she can on behalf of creditors.

The January complaint against the redevelopment authority is one example of that. It was filed by the Bernstein-Burkley law firm, which is serving as special counsel to the trustee.

In it, Ms. Crawford is seeking to claim money that was repaid to the redevelopment authority so that it can be redistributed to the creditors in the case.

She argued that the repayments were made within 90 days of the bankruptcy filing, meaning they are considered "preferential transfers" subject to recovery under U.S. bankruptcy law.

With the repayments, the redevelopment authority received more than it otherwise would have if it had participated in the distribution of the assets of the bankrupt estate in accordance with procedures under chapter 7 of the bankruptcy code, Ms. Crawford alleged.

The trustee also reserved the right to make further claims if she finds that the redevelopment authority received more money from OneJet than the $35,028 she is seeking right now.

Amie Downs, county spokeswoman, said the redevelopment authority has a similar policy to the county in not commenting on lawsuits or legal matters.

However, in its answer to the complaint, the redevelopment authority, through attorney J. Michael McCague, argued that the repayments were made in the ordinary course of business and are not subject to the bankruptcy provisions regarding "preferential transfers."

Mr. McCague attached to the answer a list of principal and interest repayments OneJet had made on the $1.5 million in loans dating back to 2016. They totaled $528,204 as of Oct. 31, 2018. It also paid another $19,589 in administrative fees.

According to the schedule, OneJet actually made $67,919 in repayments in the 90-day period before the group of creditors filed the petition seeking to force the airline into bankruptcy. It also paid $1,119 in administrative fees.

In her complaint, Ms. Crawford listed the two Aug. 20, 2018, repayments she is trying to recover at $5,243 and $29,785, respectively, for the total of $35,028.

But the redevelopment authority lists the principal and interest payments on that date at $4,828 and $29,081, respectively, plus $1,119 in fees. Altogether, they also total $35,028.

In its answer, the authority urged bankruptcy Judge Gregory L. Taddonio to dismiss the trustee's claim.

Efforts to recover "preferential transfers" are not uncommon in bankruptcies. In the OneJet case, more than two dozen claims have been filed. Any money that is recovered will go into a pot to be redistributed to creditors.

The airport authority also has filed a lawsuit against OneJet seeking to recover $763,000 of the $1 million in subsidies it paid to the airline.

Mark Belko: [email protected] or 412-263-1262.

First Published March 30, 2021, 5:08am

___

(c)2021 the Pittsburgh Post-Gazette

Visit the Pittsburgh Post-Gazette at www.post-gazette.com

Distributed by Tribune Content Agency, LLC.