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Mon, Jun 17, 2024

Icon Aircraft Bankruptcy Chooses A 'Winner' -- Appears to Be Chinese Ownership

'SG Investment America' Leads Small List Of Suitors

News, Analysis and Opinion by ANN Editor-In-Chief, Jim Campbell

The long, embarrassing saga of Icon Aircraft is entering a new chapter as court documents have identified SG Investment America as the successful bidder in the convoluted bankruptcy process that should see them as the new owner later this year.

It was not a big draw... and only General Atomics Linden Blue showed up as a serious bidder, though he was not selected despite his extensive industry knowledge as well as his prior service as a member of the Icon Board.

Some of the court documents are illuminating and some are puzzling... especially where they mentioned the company's 'status as a first mover in the amphibious LSA market' despite the fact that there were many other Amphibs out there before them, and not a lot to truly distinguish the lackluster A5 program. Despite all the hullabaloo about once having over 1000 orders on hand, the court docs also stated that Icon was unable to produce (or, apparently, sell) the 8-10 aircraft per month they needed to 'break even' (irrespective of the mountains of debt, some $170M, the company had accumulated.

Further; the 'parentage' of the erstwhile successful bidder is a bit mired in some switcheroo optics... as the company known as 'SG Investment America' is not as American as titled but pretty much owned by Chinese corporate interests... making Icon the latest of several American aviation concerns that have had their ownership and Intellectual property taken over by companies based in China, or in some cases (like Cirrus) owned by companies that were otherwise arms of the Chinese government.

The convoluted legal ownership track is described in court docs as "The Stalking Horse Bidder is a newly formed subsidiary of Dürkopp Adler GmbH (“DA”), whose parent entity is ShangGong Group Co. Ltd. (“ShangGong”), a Chinese publicly listed company. PDSTI is the largest stockholders of Debtor ICON Aircraft, Inc. and hold 51% of equity in in Shanghai Puke Flyingman Investment Co. Ltd., which holds 8.41% of equity in ShangGong. Thus, PDSTI only holds approximately 4.8% of ShangGong’s issued shares and has minimal, if any, influence with respect to the decision-making process of ShangGong. In addition, ShangGong, is a public company in China with nine directors (three of whom are independent directors), and PDSTI only has the right to nominate one director to the ShangGong board.  Mr. Min Zhang is the Chairman of the Board of Shang Gong Group and only represents the interest of ShangGong. ShangGong holds 35.29% equity interest in Shanghai Feiren Technology."

Uh... ok.

So... the Chinese lineage, while convoluted, seems fairly well-defined.

The record of the companies taken over by the Chinese or Chinese businesses is not a good one. Competitor Progressive Aerodyne has been shut down. Glasair has been pretty much shut down and its future is mirky. Terrafugia, now owned by Zhejiang Geely Holding Group, has taken all its toys to China seeking certification there and taking all its IP with it. XtremeAir was purchased by a Chinese firm, Zair Aerospace, of Wuhan in 2018 -- The company was liquidated in 2021. Cirrus Aircraft, as we have detailed in the past, has proven itself, when it suited them, to be one of the most dishonest companies we have ever dealt with... both in terms of the way it has occasionally treated customers, its staff and ownership, journalists who dared to question their statements and actions, and even elected officials who felt that some of their actions required investigation. Their behavior in regards to Founder Alan Klapmeier is particularly loathsome, both in the way they (dis)honored their agreements and the way that they tried to rewrite history and minimize the immense impact Alan had on the company. Even the acquisition of Continental has not been all that smooth as their people appeared to attempt to coerce editorial decisions and programming in exchange for advertising dollars... which at least one entity (you guessed, it... ANN) has refused. The Chinese have no allegiance to the US Constitution and several of their companies, even those doing business in the USA, have actively attacked it.

And yet, the US side of the Icon scenario doesn't seem much better with Icon's fast and loose version of its capabilities, years of delays, exorbitant price increases, extravagant parties at aviation events, and use of and reliance on truly amateur reporting from non-aviation journalists (and a few that supposedly were aviation-oriented but none the less drunk the kool-aide ladled out by Icon), a truly bizarre attempt to force an Icon-centric contract on their buyers that took many of the normal rights associated with US aircraft ownership away, even to the point not allowing legal consequences on Icon, or the fact that the aircraft were to be equipped with recording systems that were owned and accessible only to Icon... and more.

The court documents detail what was described and alleged as abusive behavior by Icon's Founder and self-described 'Democratizer of Aviation', Kirk Hawkins (pictured). "ICON was founded in 2006 by Kirk Hawkins (“Hawkins”), who served as Chief Executive Officer until November 2018.  Since its founding, ICON has consistently operated at a loss. By 2015, ICON was in dire financial conditions due to Hawkins’s mismanagement and excessive expenses, including using company funds to purchase an aircraft for personal use. To sustain operations, Hawkins actively sought investors from China, including PDSTI, which invested $100 million into ICON in 2015.  However, Hawkins mismanaged the funds by prematurely scaling the business without the demand to support it.  As a result, ICON faced a liquidity crisis again, prompting Hawkins to solicit and secure another $100 million investment from PDSTI in 2017.  Unfortunately, Hawkins quickly squandered the additional investment as well."

Interestingly, Hawkins has led several legal assaults on his former company for a number of real or imagined ills... even insinuating that the company was being set up to be fully acquired by Chinese interests and that all its assets and IP were to be (eventually) transferred to China... hmmm.

So.... we have a few hearings to endure before this mess has a chance to settle down and see just how badly the company has fared...  This June 18th, the hearing 'to consider the approval of the sale of the Assets to the Successful Bidder free and clear of all liens, claims, and encumbrances (the “Sale Hearing”)' will take place BUT may not be the end of it all quite yet... as these convoluted processes tend to be more convoluted from time to time. We'll keep you updated.

Don't pop the last of the popcorn just yet...

FMI: www.iconaircraft.com, https://www.deb.uscourts.gov/

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