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AeroCentury Corp. (ACY) stock plunged in the recent trading session: here’s why

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AeroCentury Corp. (ACY) stock recently traded at $4.24 which is a 38.64% downward movement. The ACY stock previously closed at $6.91.

The heavy plunge in the recent trading session of the ACY stock comes adjacent to the news of AeroCentury Corp. announcing that it is filing a petition for Chapter 11 Reorganization.

The Corporate profile of AeroCentury Corp (ACY)

The AeroCentury Corp. (ACY) is an established aircraft operating lessor and finance company. It has a worldwide customer base of regional airlines. ACY stock has leased from 50 to 100 passenger regional aircraft in 15 countries. The company’s asset consists of a balanced range of old and new aircraft, turboprop, and engines that it leases to regional air carriers.

The AeroCentury Corp. (ACY) is filing Chapter 11

The AeroCentury Corp. (ACY) Company prides itself on faring better than its large carrier counterpart during cyclical and economic downturns due to its business model being flexible, opportunistic, and adaptable cost structure.

However, ACY stock has hit a barricade in the form of Chapter 11 bankruptcy recently. Chapter 11 bankruptcy is usually referred to as “reorganization” bankruptcy. This bankruptcy requires a written disclosure statement and a plan of reorganization to be filed in court. The statement should disclose the concerned company’s assets, business affairs, and liabilities as such that allow the creditor to assess an informed evaluation of the debtor’s reorganization plan.

How does AeroCentury (ACY) plan to proceed?

The AeroCentury Corp. (ACY) is planning to proceed with Chapter 11 bankruptcy, specifically operating in accordance with the “debtor-in-possession” operation of its business.     AeroCentury does so because it believes this is the most effective next step for resolving the ACY stock’s outstanding indebtedness. Specifically, the reorganization of the financial operations includes the continuation of its regional aircraft business to preserve and maintain the value for the stakeholders of ACY stock.

While it is applying for “reorganization” bankruptcy, many of the aspects of business and finances remain the same. The company’s relation and interaction with its lessees will remain unchanged and the portfolio of its assets and operations will remain intact. These operations will require for utilization and maintenance of existing cash portfolios and management systems. For this, AeroCentury has filed a motion to the Bankruptcy Court seeking “first-day” relief to allow uninterrupted continuation of the business.

Auction Sale is the proposed solution by AeroCentury (ACY)

One solution given that will relieve the ACY stock of its debt is a proposal for an Auction Sale offer to Drake Asset Management Jersey Limited. Drake is the sole lender of AeroCentury Corp and has made a deal with its debtor to enter into a stalking horse agreement. This agreement consists of possessing all the aircraft collateral in order to pay up ACY’s indebtedness. Auction sales like these which are a part of the Bankruptcy filing motions can lead to successful bidding of assets and collateral of the in-debt company. This can lead to the clearance of the pending and owed payments while resolving the Bankruptcy.

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