MatlinPatterson adds to air cargo holdings

The distressed investment shop has paid an undisclosed sum for an 85 percent stake in the parent company of Arrow Cargo, the largest US air cargo carrier operating from Miami International Airport. It already owns at least one other Latin America-focussed freight cargo operator.

Distressed debt specialist MatlinPatterson has added to its collection of air cargo companies with the purchase of an 85 percent stake in Arrow Air for an undisclosed amount.

Arrow, whose Arrow Cargo logistics division is the largest US air cargo carrier operating from Miami’s airport, operates nine cargo aircraft and has some 3,500 customers worldwide, according to a statement. It provides services to and from the US, Central and South America and the Caribbean.

“Arrow is a strong competitor in the air cargo industry and a highly complementary addition to our portfolio,” Lap Chan, MatlinPatterson managing partner, said in a statement. “We intend to modernise and expand Arrow's existing fleet by introducing B757's in late 2008 and A330's in early 2010 to facilitate the company's continued growth and improve the company's profitability.”

The investment was made from MatlinPatterson’s third buyout fund, which closed on $5 billion last year.

The 14-year-old firm has a long history investing in aviation-related companies.

ATA Airlines, a US regional airline MatlinPatterson controls via parent company Global Aero Logistics, recently filed for Chapter 11 bankruptcy protection and terminated all passenger operations. Two ATA-affiliated airlines owned by MatlinPatterson, World Airways and North American Airlines, were not involved in the filings.

The New York-based private equity firm last year made a 10.5x return on its investment in Viação Aérea Rio Grandense, commonly called Varig, when it sold the Brazilian airline in March to Gol Transportes Aéreos, a low-cost competitor.

MatlinPatterson continues to own Varig’s former freight business, VarigLog.

Founded by Credit Suisse First Boston alumni David Matlin and Mark Patterson, the firm has $9 billion under management between its private equity and hedge fund platforms.