Douglas Aerospace financial crisis

Mr Pinyon on Wednesday revealed council was hoping Douglas Aerospace would trade its way out of trouble under the steerage of administrator Andrew Wily, but admitted council was also preparing for the worst.

Douglas Aerospace on Monday went into voluntary administration amid mounting legal bills from its lengthening court stoush with Indistri Engineering, the Albury company that built the hangar designed for aircraft refurbishment.

Mr Pinyon revealed that although Douglas Aerospace was up to date with loan repayments and the next instalment was due in three months, the company was in default of its $2 million plus loan from council, and council was now looking at its options.

“Council as a result of the default has a range of options open to it,” Mr Pinyon said.

“We will look at those options with our legal advisors and our elected body (councillors) and discuss them with the administrator.”

Mr Pinyon would not elaborate on the options.

Council loaned Douglas Aerospace money to build two hangars after the company was unable to obtain private finance because the hangars were going to be built on leasehold land.

Council is still owed $2.1 million, but has security in the form of the hangar and other assets.

“What we get is a hangar that is tailor-made for aircraft maintenance … so obviously its future use if it ever came into council’s hands would be based on finding a business activity to utilise that space,” Mr Pinyon said.

Mr Pinyon said the building had a limited range of uses, but as Douglas Aerospace had expected more business to come through the door council had gained confidence there was a market opportunity there for a business like that “whether it continues to run as Douglas Aerospace or in some other form”.

Mr Pinyon said council added to the security it had over the loan last October, but he declined to expand on the reasons why.

Meanwhile, Mr Pinyon confirmed Douglas Aerospace had been working in the hangar without a fire certificate, usually a requirement before buildings can be occupied.

“We haven’t overtly allowed them to, but we have not prevented them from doing so, which may be seen as subtle difference, but it is a significant point of difference … and has been applied in other circumstances where council has come across the fact there are building non-compliances,” Mr Pinyon said.

He said the action taken by council in trying to get a fire certificate had been “somewhat protracted and drawn out” but involved issuing a series of notices, obtaining legal advice, on-site inspections and expert fire reports.

“We have wanted to make sure we have done everything 100 per cent by the book in terms of compliance and not jumped to conclusions or taken precipitous actions that might be detrimental to either council in the longer term or the occupier,” Mr Pinyon said.

“So it’s not like nothing has been done. A good deal of work has been done, but there are still significant non-compliances that we believe will need to be rectified.”

Mr Pinyon said those issues had been raised with Mr Wily on Tuesday.

The general manager revealed council was reviewing processes that led to the Douglas Aerospace deal, but said nothing changed the fact that council’s 2011 airport masterplan included obtaining an anchor tenant to encourage further commercial development at the airport.

Asked if council had picked the wrong horse, Mr Pinyon said: “We’ll find out soon. At this stage I am still optimistic this will work its way through.”

Mr Wily will hold a first meeting of creditors in Sydney on May 12.

Some councillors have had concerns about Douglas Aerospace for many months.

Responding to those concerns, mayor Rod Kendall last month asked for council’s Douglas Aerospace review committee to be expanded from five councillors to all 11 councillors.