Private Equity News & Analysis

Bayside-backed Gemini Air files bankruptcy

The air freight service company has shut down after filing for bankruptcy twice in two and a half years. As aviation companies grapple with sky high oil prices, Gemini will follow in the ill-fated footsteps of The Yucaipa Companies-owned Aloha Airgroup and MatlinPatterson-controlled ATA Airlines.

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Bayside Capital-backed Gemini Air Cargo has ceased operations and is permanently winding down its business after failing to obtain a buyer and emerge from Chapter 11, according to the company’s website.

The Dulles, Virginia-based air freight servicer first filed for Chapter 11 in March 2006. HIG-affiliated Bayside, Gemini’s largest lender, scooped Gemini out of bankruptcy with a $10 million in debtor-in-possession facility and exit financing. Gemini emerged from bankruptcy that August.

Gemini once again filed for Chapter 11 in June 2008 before abruptly shutting down on 12 August without advance notice to “customers or others”, according to a notice on the website.

Private equity firms investing in distressed aviation companies is nothing new. TPG made its name turning around Continental Airlines, and, more recently, MatlinPatterson made a 10.5x return in 2007 from its investment in beleaguered Brazilian airliner Viação Aérea Rio Grandense, commonly called Varig.

WL Ross last week agreed to invest up to $100 million (€67.5 million) in struggling Indian budget airline SpiceJet, while Washington-DC based Perseus last month agreed to supply $75 million in debtor-in-possession financing and extended a $100 million equity commitment for bankrupt US airline Frontier Airlines. In June, distressed debt specialist MatlinPatterson purchased 85 percent of Arrow Air.

Bayside’s bet on Gemini has not been the first to encounter difficulties. The Yucaipa Companies-owned Aloha Airgroup shut down its passenger operations in April after the airline filed for bankruptcy for the second time sine 2004. The same month, MatlinPatterson-controlled ATA Airlines filed for Chapter 11 bankruptcy protection and terminated all passenger operations.

Bayside, the distressed debt and turnaround affiliate of HIG Capital, closed its second fund on $3 billion in June. The firm, which shares its Miami headquarters with HIG, provides equity infusions and refinancing packages to small- and middle-market companies experiencing financial hardships. Bayside also purchases existing debt on the secondary market.

Led by Levin Leichtman Capital Partners veterans Tiffany Kosch and Lewis Schoenwetter, Bayside targets companies with total enterprise values of less than $400 million. The firm typically pursues transactions of around $100 million, according to its website.