Soar Aviation’s directors have denied claims by KPMG that the firm could have been insolvent for up to a year before it entered administration, Australian Aviation can reveal.
A new note to creditors authored by the professional services firm also said the flight school’s directors maintained they “sought and obtained funding” required to run the company in January 2020.
Australian Aviation reported last week that KPMG believed the firm was insolvent “from as early as” January 2020, despite only entering voluntary administration in December 2020.
Its collapse has left unsecured creditors owed hundreds of thousands and many of its current trainees in limbo.
However, a new ‘addendum’ report from KPMG to creditors now states, “It is the preliminary view of the Administrators that the date in which Group became insolvent is likely to have occurred during the period January 2020 to 24 December 2020.
“As noted in the Report, the date of insolvency has not yet been determined and requires further investigation by a liquidator. A liquidator will consider several indicators of insolvency to determine a date of insolvency including the Group’s ability to obtain additional funding.
“The Directors have provided the following response in relation to the Administrators’ preliminary analysis:
- From January 2020 through to December 2020 the Directors of the group sought and obtained funding from Shareholders that was required to meet the ongoing trading obligations of the business.
- On 24 December 2020 the shareholders indicated that they were not going to provide any further funding.
- It is the firm view of the directors that the first date on which the Soar Group could be considered insolvent is 24 December 2020.”
The follow-up statement comes after the original report said, “From FY18 the Group [Soar Aviation] relied on external funding from the Growth Fund in order to meet operating expenses. Whilst there was no contractual obligation to provide continual funding, the Administrators’ preliminary view is that the Growth Fund loans were instrumental to the going concern of the Group.
“The Administrators believe that the Group may have been insolvent from as early as January 2020 to the date when the Growth Fund withdrew financial support of the Group, being 24 December 2020. This position will be determined by a liquidator, should one be appointed.
“As there are insufficient Group assets available to discharge the first and second ranking secured creditors, a liquidator if appointed would need to request creditors or a third party (litigation funder) to finance an insolvent trading claim.”
KPMG insists that the view that the group was insolvent would have to be “determined by a liquidator, should one be appointed”.
“In determining a course of action, a liquidator would consider the costs and risks of any proceedings and the ability to fund any proceedings, including whether creditors are prepared to forgo any scheduled dividends and/or the cost of litigation funding as an alternative,” the report said.
However, the report also stated, “Based on our investigations to date, we have not identified any offences the directors may have committed under the provisions of the Act. Our investigations with respect of any breaches committed by the directors are continuing.”
The significant report also suggests the drift into administration was caused by a number of factors, including a class action lawsuit by Gordon Legal and “adverse media”.
The news comes after Australian Aviation reported in January how callers trying to contact Soar were presented with a voice message bluntly informing them that the business wouldn’t be taking or responding to any messages.
Callers, many of whom were likely to be current students trying to get through to Soar, were given no advice on how to seek help, and were simply told, “Unfortunately, as of 29 December 2020, we are unable to take your call, take any messages or return any messages. We apologies for any inconvenience caused.”
On that date, the business entered administration with KPMG partners Brendan Richards and James Stewart appointed to help the business pay off its huge debt pile.
Founded in 2012, the company grew to have campuses at Moorabbin Airport in Melbourne, Bendigo Airport in regional Victoria and Sydney’s Bankstown Airport.
Its fleet of 50 aircraft comprised Bristell LSA, Technam P2006T, Foxbat A22LS, Vixxen A32 and Aquila A210 aircraft, according to the company’s website, as well as a CKAS 7D0F simulator.
However, things turned sour in 2019 when partners Box Hill demanded the business supply documentation about its fleet and trainers.
Soar’s registered training organisation status was then revoked after an audit by the regulatory body for vocational education sparked by complaints by former students, alleging they didn’t receive the training they were promised.
Gordon Legal then launched a class action on behalf of 200 students arguing its teaching standards were so poor it didn’t meet the basic CASA requirements to obtain a pilot’s licence.
While the business had its accreditation restored, it still faced sanctions.
More seriously, the ATSB is currently investigating an incident that saw a Soar Aviation instructor and student die when one of its Aquila AT01s crashed in the NSW central west last year.
Both Saket Kapoor, 38, and Shipra Sharma, 26, died when the incident occurred at a private airstrip. No conclusions have yet been reported by the ATSB.
Founder Neel Khokhani resigned in early 2019, though has insisted it was purely a result of personal health reasons unrelated to the company’s struggles.