Springer Aerospace is looking for new owners

Media coverage of the situation at Springer Aerospace has so far almost exclusively focused on the Echo Bay company's restructuring efforts.

At the same time, with far less fanfare, Springer is also launching a court-supervised sale and investment solicitation process (SISP), aimed at finding partial or full new ownership for the 100-employee firm.

Christopher Grant, the company's chief executive officer, quietly began shopping the company in advance of last week's application for bankruptcy protection.

"I have undertaken some private marketing of the business to assess interest in a potential sale, investment or financing of the business," Grant said in a sworn affidavit filed with Ontario's Superior Court last week.

"I have spoken with third parties, including large international aerospace corporations, as well as employees of Springer who wish to invest in the corporation," Grant said. 

"I believe there is more interest in Springer as a going-concern aerospace company than in liquidation."

"Specifically, there are long-standing employees of Springer who believe in the viability of the business and who may wish to become investors."

"None of the proposed transactions that have been discussed with me have the ability to close with the speed necessary to meet Springer’s cash flow requirements."

"Accordingly, Springer requires additional time to properly market the business as a going concern," Grant said.

Springer's biggest creditor is Caisse Desjardins Ontario Credit Union Inc.

Desjardins is less optimistic about the prospects for a quick sale of the company.

"Given the nature of the business, there are unlikely to be a large number of potential investors and very few operators who would consider purchasing or investing," said Haddon Murray, a lawyer representing Desjardins, in a Nov. 21 letter to Springer's lawyer that was entered into court evidence.

"Desjardins has lost any confidence in management," Murray stated, citing "Desjardins' well founded concerns about management's competence to effectively operate the business."

Springer has promised to "develop and file the materials necessary to seek approval of a sale and investment solicitation process for the assets, property and undertaking of the business, with the intention of seeking approval of and implementing the SISP, taking into account the specialized nature of the business and the upcoming holiday season."

In the meantime, having been granted protection from its creditors and $1.5 million in debtor-in-possession financing, Springer will carry on its business operations as it undergoes restructuring under the Companies' Creditors Arrangement Act (CCAA.)

Judge Michael A. Penny of the Superior Court, who is overseeing Springer's insolvency case, is making it clear he doesn't want to see the Bar River airport and other Springer assets sold off piecemeal.

"This is not proposed to be a 'liquidating CCAA.' It is an attempt to operationally and financially restructure," Justice Penny said.

"The complete cessation of the Springer business or even a major disruption would likely be irreparable."

"Springer has built its business up since 1972. It has trained and retained a skilled workforce through the COVID-19 pandemic."

"It has developed a reputation and expertise in a specialized industry and its customers are large corporations and governments who rely on Springer’s services."

"While the CCAA filing may cause some disruption to the business, a shut-down or liquidation would likely effectively terminate operations with little or no chance of recovery."

"At first blush, the evidence suggests that the value of the land, in addition to the equipment and other assets of [Springer] likely exceeds liabilities owing to Desjardins."

"In addition, public policy weighs in favour of a going-concern restructuring. Springer is a significant local employer. It is also operating in a critical sector that is vital to the fly-in and Indigenous communities in Northern Ontario," the judge said.

Springer has retained Patrick Walsh from New York City as its chief restructuring officer.

On Tuesday, Walsh will hold a face-to-face town hall meeting with the company's workers.

Interestingly, Grant's sworn affidavit claims that with 100 employees, Springer is "the second largest employer in the region after the Algoma Steel mill in Sault Ste. Marie."

"Springer is the only employer of its kind in the region. There is no other employer in the region that could take on all of Springer’s skilled employees. Our employees would have to relocate their families away from northern Ontario to find similar employment in the aerospace industry," Grant says.

The company's most recent financial statements show assets of $17 million.

Liabilities total $12 million, as follows:

• current liabilities, including bank indebtedness, of approximately $4 million
• promissory notes payable of approximately $1.2 million
• long-term debt of approximately $6.3 million
• deferred contributions of approximately $370,000
• $797,227 remains outstanding to development corporations

Grant says that he and Daniel Springer have made shareholder loans to Springer.

"The loans are unsecured, payable on demand, and do not bear interest. In total, Daniel Springer is owed $1,378,000 and I am owed approximately $600,000 in shareholder loans," Grant says.

He adds: "With the high turnover of key management and the highly specialized business that Springer operates, it is imperative to ensure that the directors of the company, being Daniel Springer and me, are able to remain involved."

The following description of Springer Aerospace has been excerpted by SooToday from a 40-page affidavit sworn by Christopher Grant on Nov. 22:

Springer operates one of the largest aircraft maintenance, repair and overhaul businesses in Canada dating back to 1972. Springer’s services include, for example:

• line maintenance (lubrication and repairs), heavy maintenance, and major modification of aircraft
• engineering, design and manufacturing of aircraft modifications, replacement parts, upgrades and conversions, including aircraft components such as aircraft fuselage (e.g the frame, formers, stringers, and skins), wings, empennage, landing gear, interior, special mission equipment, floats, waterbombers, and avionics
• installation and certification of aircraft modifications, replacement parts, upgrades and conversions

Springer has teams of engineers who travel to service customers at their locations, anywhere in the world. Springer’s mobile repair teams are particularly useful where it is not practical or feasible to transport an aircraft to Springer’s facilities.

These teams are adept at delivering the services described above, supporting the customers’ operations on-site in the normal course, and performing unique services like salvaging damaged aircraft.

Springer has special expertise in the salvage and rebuilding of derelict aircraft. The company specializes in the rebuilding of otherwise obsolete or damaged aircraft and restoring them to good working order.

In addition, Springer is one of two companies in the world that converts passenger airplanes to cargo airplanes for ATR, Beachcraft, DASH-8 series aircraft.

In addition to aircraft maintenance and salvage, Springer also offers specialized aircraft painting services. Aircraft painting requires large hangars and specialized equipment. Springer’s facilities include a modern, environmentally controlled aircraft painting facility that meets or exceeds all applicable regulations. I am aware of only two other companies in Canada offering aircraft painting services and there are no companies in North America that provide maintenance and painting services at one facility.

Springer also offers aircraft storage services, such as commercial and private float plane winter storage.

To my knowledge, Springer is the only company in Canada to offer all of these services as a one-stop-shop. Springer has the hangar capacity to run up to seven lines or projects at once, including major or heavy projects.

Springer’s business is operated from facilities located in Echo Bay, Ontario, 15 kilometers east of Sault Ste. Marie and across the St. Marys River from Michigan, USA.

There are three hangars and an airport located at 377 Lakeview.

The first hangar is 16,160 square feet in size and is 17 feet high. It houses an industrial bay, offices, and storage.

The second hangar is 24,373 square feet and 30 feet high and houses an industrial bay for aircraft work, a paint shop as well as offices and other amenities.

The third and newest hangar is 33,000 square feet and is 59 feet high. This third hangar was built in 2020 at a cost of approximately $3 million and houses the largest industrial bay, which is large enough to accommodate up to two Boeing 737s.

Springer’s customers are located throughout the world and include aircraft manufacturers such as Bombardier, De Havilland and Basler as well as commercial operators such as Air Canada (Jazz) and Porter Airlines.

Springer also services fleets operated by provincial and federal governments, corporations and individuals. Of note, Springer’s customers include substantially all of the Canadian airlines and corporate fleets that service fly-in and Indigenous northern communities.

Significant customers include DHL (leasing division), which engaged Springer for the conversion and rebuild of numerous derelict aircraft which were delivered to South Africa. Springer is one of two companies in the world and the only company in Canada that is able to perform these conversions and rebuilds.

Springer also has a contract with the Canadian Department of National Defense for the maintenance of their fleet.

In addition to the above, a large percentage of Springer’s customers service the northern Ontario region by providing air transport for individuals, delivery of food, fuel and medical supplies as well as air ambulance services to the most remote areas of northern Ontario, including most of the fly-in and Indigenous communities.

Generally, new customers seeking Springer’s services are typically provided with a proposal that describes the scope of work, pricing and milestones. Springer currently has a healthy pipeline of customer contracts and I estimate that there is a two-year waitlist for aircraft painting services and a six-month waitlist for mechanical/conversion projects.

The majority of Springer’s suppliers and vendors are local businesses in Echo Bay or local branches of international companies set up to service the northern Ontario region.

Given Springer’s location in northern Ontario and the specialized nature of the aerospace business, there are limited vendors who are able to supply the specific products and services that Springer requires.

Material suppliers include suppliers of engineering services, aircraft parts and supplies, paint shop supplies, utilities, freight, and others.

The value of Springer’s business is maximized as a going concern. Liquidating the business will result in significantly less value for creditors and will impact the many employees, contractors and suppliers who rely on Springer for employment and income. As a major Northern Ontario employer, Springer’s value to the Northern Ontario economy is greater than just its liquidation value.

I believe that Springer will be a viable and profitable enterprise if we can implement the proposed operational and balance sheet restructuring. I also believe that maintaining the business as a going concern is the only way to avoid the devastating impact of business closure on this northern Ontario community and maximize realization for all stakeholders.