The Aerospace Development Corporation (ADC), which is developing the Ahrlac aircraft, is currently undergoing business rescue proceedings in order to ensure the sustainability of the company.
Paramount Aerospace Holdings and the Potgieter family each have 50% stakes in the Aerospace Development Corporation (formerly Ahrlac Holdings). On 28 February Paramount made an application to the North Gauteng High Court for the company to be granted Business Rescue status.
After a deadlock between Paramount and ADC, the board of the Aerospace Development Corporation on 20 March adopted a resolution to voluntarily commence business rescue proceedings, with Stefan Smyth from Pricewaterhousecoopers appointed as business rescue practitioner.
Documents state that ADC “is financially distressed in that it appears to be reasonably unlikely the company will be able to pay all of its debts as they become due and payable within the immediately ensuing six months.
“The company has become financially distressed due to a dispute raised with a third party licensor, which has resulted in the cessation of loan funding. Furthermore the company has faced delays in completing the first two aircraft on order, which are a pre-requisite for the activation of further aircraft orders.
“This has aversely affected the company’s cash flow and which has therefore caused the company to become financially distressed.
“The belief of the majority of the [ADC] board is that there appears to be a reasonable prospect of rescuing the group in that the company’s 50% shareholder (Paramount Aerospace Holdings Pty Ltd) is prepared on business rescue proceedings commencing, to advance post commencement finance to the company on terms as agreed with the appointed business rescue practitioner.”
ADC has subsidiaries which include the Aeorsud Innovation Centre (Pty) Ltd, which offers engineering design and development services to other subsidiaries; Ahrlac (Pty) Ltd, which focusses on production of the Ahrlac aircraft; ADC Aeroswift (Pty) Ltd, which is responsible for laser additive manufacturing in partnership with the CSIR’s National Laser Centre; ADC Surveillance Systems (Pty) Ltd, which is a focus point for all activities related to Ahrlac mission and payload installations; Mwari (Pty) Ltd, which is an inactive shell company established for the colocation of weapon system-related activities for the Ahrlac aircraft; and ADC Logistics (Pty) Ltd, which was set up to provide maintenance, overhaul and logistics services for the Ahrlac.
Ahrlac Logistics was placed under business rescue on 12 April; Aerosud Innovation Centre on 4 April; Ahrlac on 4 April and ADC Surveillance Systems on 12 April.
It was earlier reported that the Ahrlac factory at Wonderboom airport has been shut since at least the beginning of the year, with around 140 employees sent home. They did not receive January or February salaries.
Earlier allegations suggested conflict between the Potgieters and Paramount stemmed from the misappropriation of intellectual property and funding obligations from Paramount.
In March, Paramount said that “over the past nine years, Paramount Aerospace and its affiliated companies have significantly invested their own capital, as well as supported and underwritten the raising of third party funding to the tune of hundreds of millions of Rands. This was done in support of what is a truly unique global aerospace project and we remain dedicated to supporting the programme and seeing it through to fruition.”
Paramount added that it “fully supports the company and we believe very strongly in the programme. We are therefore fully committed to the Business Rescue process. The Business Rescue Practitioner will be supported to raise immediate funding so that the employees and creditors of ADC can be paid.”
Ahrlac, an acronym for Advanced, High-performance, Reconnaissance Light Aircraft, is a high-wing, push propeller, single-engined aircraft designed as a lower cost alternative to unmanned aircraft for reconnaissance and attack missions. It first flew in 2014. Ivor Ichikowitz’s Paramount Group is said to be the launch customer for Ahrlac on behalf of another client.