NEWS

by Maureen Flanagan

After reorganizing in 1995, The New Piper Aircraft, Inc. is taking off again. The company, which designs, develops and manufactures general aviation aircraft for domestic and international markets, posted record billings in early 1998, continued to upgrade its line of piston-engine planes, and rolled out a new turboprop aircraft with cockpit avionics developed for the 21st century. In May 1998, American Capital (Nasdaq:ACAS) participated in the new beginning for New Piper, investing $20 million in the company in the form of subordinated debt with warrants.

"American Capital looks forward to working with this company as it continues to play a leading role in shaping the general aviation market in the next century," said Malon Wilkus, President and CEO of American Capital.

The New Piper is one of the three major U.S. manufacturers of general aviation aircraft and the market leader in piston-engine planes. It currently manufactures eight models, many with names that invoke images of the American frontier -- the Malibu, Seneca V, Arrow, Warrior III, Archer III, Saratoga II HP and TC, and Seminole. These aircraft are sold to businesses, flight schools, commercial flight training centers and individual owners and operators in the U.S. and abroad. Some 95,000 Piper planes are now flying all over the world, including the famous Piper Cub, a two-seat airplane used in World War II and one of the first planes to come off Piper's production line.

Piper Aircraft was founded in 1937 and reached its peak in the mid- to late-1970s. At that time, the company employed 7,800 workers at four plants, producing as many as 5,000 planes a year, with annual sales exceeding $400 million. But, by the early 1990s, changes in the small aircraft market had begun to take a toll. Overproduction, revisions of investment tax credit laws and cutbacks in federally funded flight training programs sent the company on a downward spin. Added to this, aircraft manufacturers faced unlimited liability for their products, making liability insurance prohibitively expensive. In 1991, Piper could no longer obtain affordable insurance or cover liability expenses from its operations and the company declared bankruptcy.

However, a group of managers at Piper, led by Chuck Suma, the current President and CEO, refused to let Piper die. Although Piper had shut down most of its operations at the time of the bankruptcy, Suma and his management team worked tirelessly to rebuild the company. Within 18 months, they had returned the company to profitability and increased the workforce from 45 employees to over 300 employees. Then in1994, the Congress passed the General Aviation Revitalization Act. This Act, which shielded aircraft manufacturers from liability for planes older than 18 years, reduced Piper's pool of potential liability to a manageable level and was instrumental in allowing the company to emerge from bankruptcy. In July 1995, the company completed a reorganization plan, creating New Piper, which acquired the assets of the bankrupt company. A federal judge approved a plan to sell the company to Philadelphia investment firm Dimeling, Schreiber and Park and creditor Teledyne Industries.

The company continued its comeback under the new ownership with the continued leadership of Chuck Suma. By 1998, on firmer financial footing, New Piper was in a position to refinance its existing debt and raise capital for future growth. The company chose American Capital to provide the subordinated debt portion of the refinancing. American Capital, a buyout and specialty finance company, headquartered in Bethesda, Md., provides senior debt, subordinated debt and equity to companies in need of capital for growth, acquisitions, employee and management buyouts, liquidity and restructurings. As of the New Piper financing - its first in the aviation industry - American Capital has invested more than $90 million since its initial public offering in August 1997.

"The opportunity to invest in Piper was competitively bid," said American Capital Principal Ira Wagner. "We are proud of our ability to rapidly evaluate the company and the industry, and then to underwrite and close the transaction in a timely manner."

New Piper's prospects have never looked brighter. In the last three years, the company's revenues have steadily increased; billings for the first six months of 1998 set a record high. International sales have also taken off. The company's international distributors have grown and represent a significant amount of New Piper's business.

On August 13, 1998, the company rolled out the new Malibu Meridian, a six-seat single-engine turboprop aircraft that can reach altitudes of 30,000 feet and cruise from New York to Miami. The state-of-the-art Meridian "is the benchmark for future airplanes to be measured against," says Suma. Its "glass cockpit" comes equipped with 21st century avionics designed to reduce pilot workload, and enhance navigation and communication as well as the reliability of the avionics systems. Although still two years away from delivery, the company already has orders for 90 planes. The cost at $1.3 million is barely half the price of the closest comparable model made by a competitor.

New Piper also continues to upgrade its product line of piston-engine planes and encourage customers to move up to more sophisticated models. Reviews have been excellent. According to Flying magazine (July 1998), the company's Malibu Mirage - "the airplane of every kid's dream" when it was introduced in 1984 -- has been further refined with improvements that include "a three-blade composite Hartzell prop with steel leading edges. an interior and panel as fine as anything in business jets. and an engine instrument cluster as modern as tomorrow."