AvCraft searching for buyer; Horry County demands payment for past due rent

AvCraft Technical Services, a Myrtle Beach maintenance company that promised to hire 150 workers three years ago, owes Horry County more than $91,000 in rent payments and is on the verge of closing its doors, according to public records.

Once hailed as the first success of the revamped Myrtle Beach Regional Economic Development Corp., the company never fulfilled its job creation promises and has struggled to grow the way AvCraft’s leaders hoped it would.

That descent culminated in a Jan. 29 default notice from Horry County. The letter and a series of emails between county staff and a company official show that AvCraft laid off eight workers last month and has desperately been searching for a buyer. The emails also indicate that two European companies have expressed interest in the company, but neither found the county’s lease rates favorable. County officials say they aren’t budging on those rates.

As of Feb. 1, the company owed $91,460.67 for rent on three buildings, according to the county’s letter. AvCraft was told to pay the the amount by Feb. 5.

County spokeswoman Lisa Bourcier said the company hasn’t made any payments since the notice was sent. A rule to vacate was filed Thursday.

Despite the legal proceedings, county officials insist they are still searching for a solution that will keep the company operating.

AvCraft President Mike Hill also confirmed he is in negotiations with the county, but declined to comment further.

Possible sale

Emails between Hill and county officials indicate the company is in dire financial shape.

“Unfortunately we are fast approaching a drop dead date for the current operation to survive and the subsequent loss of all jobs,” Hill wrote in a Jan. 23 email to county airport officials.

For AvCraft, turmoil isn’t new.

Three years ago, the aircraft maintenance company announced it would hire 150 employees in exchange for $200,000 in state and local grants. The press release was the first from the EDC after the group’s 2011 reorganization, which saw the jobs agency receive an increase of more than $1 million in county funding to support its efforts.

But last fall, Hill told The Sun News there was no way the company would meet its hiring promises. He also said AvCraft had not touched the grant money because of concerns about the firm’s future.

At that time, county officials began meeting with AvCraft leaders to discuss the company’s agreement and any possible lease changes that might keep the business, which has about 50 employees, afloat.

Horry County Council Chairman Mark Lazarus said the company has a new proposal for county leaders to review, but council members haven’t seen it yet. He did not indicate what the offer entails. Lazarus did say a rent reduction isn’t happening.

“As I told them before, I don’t think the council moving forward is willing to reduce the rent at our facilities,” he said. “We’ve already been down that road.”

A troubled history

AvCraft originally moved to the beach from Tyler, Texas, in 2003 when the Myrtle Beach Air Force Base Redevelopment Authority agreed to reimburse the company up to $750,000 for upgrades at several hangars at the airport. The county also agreed to cut its hangar rent from $5 per square foot to $2 per square foot and S.C. officials chipped in tax credits and job creation credits worth up to $281,600 annually if AvCraft hired 80 workers within its first year.

At the time, AvCraft announced plans to create 280 jobs within five years.

After one year, however, AvCraft had failed to meet its projections. The company hired 65 workers instead of the 80 required under the incentives agreement. In response, the county canceled the initial deadline and gave AvCraft another six months to reach the goal. When that new deadline rolled around, AvCraft’s employee count had dropped to 53, and the company’s German production plant had filed for bankruptcy protection.

The company didn’t receive the full $750,000 local reimbursement and wound up losing the state incentives because it didn’t create the number of jobs it had promised.

Then, Ben Bartel – AvCraft’s former chief executive – was arrested in Germany in 2005 on charges of tax evasion. The charges were later dropped and Bartel was never convicted of any crime.

AvCraft announced another job expansion – this one for 50 new jobs – in 2009, but the promise didn’t pan out and the company came back to Horry County Council the following year asking for a reduction in its hangar rent as the company was on the verge of going out of business.

In 2010, KNH Aviation Services Inc., a group of investors led by Hill, bought all of the company’s assets. Hill has said that AvCraft was in poor financial shape shortly after he arrived, but he worked with creditors who wanted to shut down the company and was able to revive the business with a new investment group.

Any hope?

When the EDC announced AvCraft’s hiring plans three years ago, Hill expected the market for the firm’s services would expand.

That didn’t happen and AvCraft officials never used the state or county money made available to them.

The facility the company rents near Myrtle Beach International Airport has also caused headaches, according to emails between Hill and county leaders.

The company wanted the county to invest $400,000 in upgrades for the facility, but the county refused to do so. County leaders did agree to request money from the Myrtle Beach Air Force Base Redevelopment Authority for that purpose if a new lease is approved.

If AvCraft pays its past due rent, the county has offered to inspect a fire suppression system in one of the hangars and spend up to $80,000 to repair the system, if needed. And the county would consider rental credits if the company – or its new owner – made upgrades to the facility.

The most daunting challenge for AvCraft, however, is finding a buyer. A Denmark company had been interested in aquiring AvCraft, but that business insisted on a lower lease rate than the county would accept, according to the emails. That left the Myrtle Beach firm searching for another option.

On Jan. 28, Hill sent Lazarus an email with the subject line “Rescue Plan Option 2.”

In the email, Hill describes AvCraft’s discussions with a “possible second suitor,” which isn’t identified but is described as a European-based company that is not an airline and is less demanding than the Denmark business. The second company plans to grow in North America, Hill wrote, and has a portfolio of more than 200 aircraft throughout the world.

“They are very interested in a uninterrupted workforce and FAA certificate process to purchase AvCraft and continue maintenance here at MYR,” he wrote.

However, Hill wrote that this potential buyer also doesn’t like the county’s lease rate ($2.85 per square foot) and wants to know if county council would agree to a rate in the $1.50 to $1.75 range.

Two days later, county attorney Arrigo Carotti sent Hill an outline of what AvCraft – or its buyer – would have to do to reach a new contract:

It’s unclear where the negotiations stand. Lazarus said the latest AvCraft proposal he’s seen “might be workable” but he can’t speak for other county leaders. The council won’t meet again until March 3.

Lazarus said he doesn’t want to lose the AvCraft jobs, which pay an average of $19 per hour. However, he said the council has an obligation to monitor public facilities and county investments.

“We certainly don’t want any company to leave,” he said. “But at the same time, we’re in the economic development business.”

This story was originally published February 21, 2015 at 3:00 PM with the headline "AvCraft searching for buyer; Horry County demands payment for past due rent."