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Re: PT Investor post# 5

Monday, 01/24/2005 3:37:41 PM

Monday, January 24, 2005 3:37:41 PM

Post# of 52
State warns Navajos to slow down on aircraft deal



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ALBUQUERQUE (AP) - Two state agencies are cautioning the Navajo Nation about a proposed $34 million investment in an aircraft company after a preliminary review uncovered problems with the proposed deal.

The New Mexico Finance Authority cited past bankruptcies, questionable customers and the chief executive officer's sizable severance package after reviewing Utilicraft Aerospace Corp.'s proposal.

The Finance Authority, along with the state Economic Development Department, warned the tribe to proceed with extreme caution before putting any money into the project.

The tribe is considering investing in Utilicraft, which said it would relocate from Georgia and build several plants on tribal land and in Albuquerque. The tribe has said the deal could bring hundreds of high-paying jobs to the Navajo Nation, where unemployment is around 58 percent.

While state economic development officials introduced the company and its plans to the tribe last year, Secretary Rick Homans said in a December letter to a Navajo official that the state never vouched for the company.

Homans told Allan Begay, executive director of the Navajo Nation's Economic Development Office, that such investments in startup companies with no history can be ''very risky.''

The letter also cited a recent issue of industry publication Aviation International News, in which the magazine gave Utilicraft a less than 25 percent chance of success.

Homans wouldn't comment on the proposed deal, and Begay did not return calls seeking comment.

The tribe's Economic Development Committee approved a motion Jan. 12 to invest the first $1.25 million from its Business and Industrial Development Fund. The remaining $32.75 million would have to be approved by the Navajo Nation Council.

At the tribe's request, the state Finance Authority hired a consultant to review the deal in December. A copy of the review was delivered to the tribe Jan. 3.

The review found that the $34 million investment by the Navajo Nation would only buy the tribe a 25 percent ownership stake despite a total company valuation of $8 million to $10 million.

It also found a low likelihood that two key aircraft sales contracts would materialize due to a history of bankruptcies accompanying the CEO of one purchaser and the lack of available information for the other.

As part of the proposal, Utilicraft CEO John Dupont would get a nearly $100 million severance package should problems with the deal develop.

According to the Finance Authority, company rules allow Dupont to initiate his own severance package by terminating himself if his responsibilities are changed, his pay is cut or the geographic location of his job is moved by more than 20 miles.

Utilicraft Aerospace Corp. is a privately held spinoff company of American Utilicraft Corp.


AP-WS-01-22-05 1509EST




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