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Kiwi Gets
$2.2 Million to Help Recovery
Kiwi International
Airlines has received a $2.2 million loan to aid its post-bankruptcy
recovery, but the Newark-based carrier is paying dearly for the
cash. The five-year, interest-only loan from Hackensack-based Kennedy
Funding comes with a 15 percent annual interest rate, nearly twice
that of conventional bank financing, said Kennedy President Jeffrey
Wolfer.
 The
loan, coming during the airline industry's post-Christmas slow season,
will help pay for federally mandated maintenance of Kiwi's eight
planes, said Charles Edwards, the Baltimore physician who rescued
Kiwi from bankruptcy last year.
Edwards said the maintenance could cost as much as $1 million per
plane. "Kiwi never will cut one corner," he said. "We'll
pay the million dollars, and if we don't have the money, I'll personally
contribute it. End of story."
Under the terms of the loan, Kiwi must make interest payments equal
to 15 percent of the principal each year for five years, and then
a final payment of the $2.2 million principal, Wolfer said.
The loan is secured by Edwards' personal assets, which he identified
as a number of apartment buildings in unspecified locations in New
Jersey.
Wolfer said the transaction does not give Kennedy Funding an ownership
interest in Kiwi. But he said Kennedy reserves the right to seek
such an interest if Kiwi is unable to make payments, and Kiwi reserves
the right to offer such an interest in lieu of payments. Edwards
said he is confident that Kiwi will be able to make the payments
in full and on time, adding that $2.2 million represents 2 percent
of Kiwi's annual revenues.
He added that Kiwi probably will have to seek additional loans in
the future "to fund operations while building the airline back
to profitability. When you're rebuilding an airline, you have many,
many millions of dollars to fund," he said. "You don't
want to borrow too little to late and jeopardize its financial stability.
You want to have a balance of debt and equity. We'll be borrowing
many more times again." Rob Kulat, a spokesman for Kiwi, declined
to comment. But Edwards said he went to Kennedy and agreed to pay
15 percent interest because banks "have taken an exceedingly
long time" to process loan requests.
With Kennedy, Wolfer said, negotiations took just two weeks, and
Kiwi received a commitment in one day. Edwards, who knew the father
of Kennedy Funding's vice president, Paul Feffer, approached the
company with a request for $2.2 million, and the company agreed
to that amount, he added.
Kiwi has been battling financial problems since it took to the air
in 1992. Troubled by stiff competition, regulatory problems, internal
dissension, workforce reductions, and staggering debt, the employee
owned company filed for Chapter 11 protection in Federal Bankruptcy
Court in Newark in September 1996. Several weeks later, it suspended
flights for three months.
In June 1997, Edwards and a group of Florida-based investors, Wasatch
International Group, offered $16.5 million - including $10 million
in pledges made earlier by both parties - for control of the airline.
The bankruptcy court approved the sale, and Kiwi has been rebuilding
itself ever since. In addition to Newark International Airport,
Kiwi serves Chicago, Boston, Las Vegas, Atlanta, Tampa, Orlando,
Palm Beach, and San Juan, Puerto Rico.
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