08/22/2012 09:29 EDT | Updated 10/22/2012 05:12 EDT

MTU calls Aveos sales process that allowed late bids 'fishy' and unprofessional

MONTREAL - The liquidation of Aveos' engine repair business resulted in last-minute negotiations that were "fishy" and unprofessional, a vice-president of the losing bidder told court Wednesday.

The chief restructuring officer overseeing the sale encouraged the two German bidders to increase their offers in the days after the deadline for bids closed.

Lufthansa Technik ultimately tripled its original offer, while MTU Aero Engines refused.

"If I knew I was in a Turkish bazaar, I wouldn't have put my best foot forward. I feel like a fool," Juergen Kuhn, the head of business development for MTU testified.

MTU and the union representing former Aveos employees challenged the transparency and fairness of the process that led to Lufthansa being the recommended buyer.

They contend Lufthansa's latest bid shouldn't have been allowed because it was submitted after a deadline and before Lufthansa twice increased its offer.

But CRO Jonathan Solursh insisted the process was fair and negotiations were always included in the rules of the game conveyed to bidders.

In fact, he told the court he favoured MTU's job-creating plan but had to accept a higher offer from Lufthansa Technik.

"Personally I liked the MTU story," he said, referring to MTU's plans to hire more than 130 workers, including former Aveos employees, in Montreal and Vancouver.

Solursh said Lufthansa's decision to triple its bid — to about double what MTU offered — made the decision clear for him.

"The gap is so big, it's so obvious who the winner of the contract is," he said.

The value of the winning bid hasn't been disclosed but MTU valued its offer at $5.2 million, which included $4 million plus the acquisition of specialized tools from Aveos.

The Vancouver-based subsidiary of Germany's MTU valued the tools at $1.2 million, but the chief restructuring officer testified the amount was less than the liquidation price.

But Kuhn said Solursh wasn't really interested in the company's plans to create 130 to 150 jobs.

"He always told me it was all about the money. He doesn't care about the jobs. His creditors don't care about jobs."

Union lawyer Hugh O'Reilly said the creditor protection process requires that jobs and impact on communities of the bids must be considered, along with financial benefits to the secured creditor, Credit Suisse.

"These issues do have to be balanced," he said, noting that employees have also lost money as unsecured creditors.

But Justice Louis Gouin raised doubts about how much non-financial factors can be considered in the sale, adding that unfortunately, money is the most important factor.

Gouin said he will decide on who wins the bid late Thursday. At one point, he agreed with lawyers for Aveos that MTU behaved like a bitter bidder in trying to block the Lufthansa deal.

Earlier, Solursh sparred with MTU's lawyer, who tried to convince him not to accept the recommendation to approve the unit's sale to Lufthansa.

"The process was not the late bid by Lufthansa should not be accepted," Francois Gagnon said.

IAMAW district president Chuck Atkinson was slated to testify Wednesday afternoon as machinists lawyers present their case.

The company had been Air Canada's main provider of aircraft overhauls and heavy maintenance.

The court has delayed a decision on the Lufthansa Technik deal to give opponents an opportunity to challenge the fairness of the proposed transaction.

The opponents are not only challenging the sales process but also the veracity of Solursh's report submitted to the court.

Aveos terminated about 2,600 jobs across the country, including some 1,800 in Montreal, when it suddenly obtained creditor protection and closed its operations in March.

Another judge granted the request last week for a delay after Air Canada (TSX:AC.B) agreed to extend the deadline for its contract with the winning bidder beyond its Aug. 15 deadline to meet its engine maintenance needs for the fall season.

The engine repair business is the last part of the Aveos business to be sold. Last week, the court approved the sale of the component repair business to British-based firm A J Walter Aviation for an undisclosed sum. The company plans to create about 200 jobs.

Earlier, its airframe business and other assets were sold for $10.8 million to three Canadian firms, two U.S.-based companies and one liquidator.

The buyers of the airframe business include Avianor Inc. based in Mirabel, Que., Avmax Aviation Services Inc. of Calgary and Discovery Air Technical, a subsidiary of Yellowknife-based Discovery Air (TSX:DA.A).

Premier Aviation Overhaul Center of New York, which has an operation in Trois-Rivieres, Que., and Illinois-based Aircraft Services Inc. also acquired parts of the business.

Liquidator Maynards Industries Ltd. bought several lots of equipment that are being sold at auction.