The administrators appointed to defunct airline Bonza say the company may have sold tickets for flights for more than a month after it became insolvent and recommended the corporate regulator investigate its directors.
Hall Chadwick’s report into the failed budget carrier found Bonza may have had significant solvency and operational concerns from November and appeared to be insolvent from March, long before its operations were suddenly ground to a halt on April 30.
Bonza’s administrators Hall Chadwick have found the company probably traded while insolvent. Credit: AAP
It also said the airline had recorded continued losses from its inception which accumulated to $133 million by the time it entered voluntary administration at the end of April. It lost $80 million this financial year on top of a $50 million loss last financial year, and owes about $2 million to the Australian Taxation Office.
A second creditors meeting has been called for July 2 where its 60,000 owed parties will determine whether the company should be wound up, as Hall Chadwick has suggested.
“The company had a working capital deficiency as at June 30, 2022, June 30, 2023 and April 30, 2024. This is an indication that the company was cash-flow insolvent during the above periods and did not have sufficient liquid assets to meet its current liabilities,” an excerpt from the report reads.
Bonza was forced to stop its operations on April 30 when its aircraft lessor, AIP Capital, attempted to repossess its fleet for unpaid debts. The bulk of the millions of dollars Bonza owes is to its former private equity backer, 777 Partners, but money is also owed to 323 sacked staff who were not paid for weeks before the airline came unstuck, and 71,399 customers whose flights were cancelled.
Hall Chadwick found in the preliminary review that Bonza’s four directors may have committed an array of corporate offences including failure to exercise reasonable care and diligence in discharging their duties, failure to act in good faith, failure to assist the administrators’ investigation and failure to keep adequate records.
“It appears the directors continued to incur debts and accept bookings on behalf of the company since at the very least March 2024, but possibly earlier, in circumstances where: the leases were in default and the company did not have sufficient funds to rectify the defaults; there was doubt the company would be able to repay the debts it incurred; there was doubt that the company would be able to fulfil bookings that it received.”
Hall Chadwick also said it appeared the directors knew, or ought to have known, its private equity backer, 777 Partners, would stop funding the company and that their aircraft lessor had sought to repossess its planes. It said founder Tim Jordan and chief financial officer Lidia Valenzuela had co-operated with the administrators, but US-based 777 Partners directors Steven Pasko and Adam Weiss did not.
Happier times: Bonza founder Tim Jordan.
“In those circumstances, a director acting reasonably would have taken steps to cease the business of the company, or appoint an external administrator much earlier than April 30, 2024,” the report said.
Hall Chadwick quantified the potential insolvent trading claim at $40,486,132. If the corporate regulator upholds the claim that Bonza did trade while insolvent, its directors and holding companies may be liable.
A spokesperson for the Australian Securities and Investment Commission said it would investigate the claims.
“ASIC is considering information provided to us by Bonza’s administrators.”
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