Tim Sheehy, the Republican set to turn Montana and the US Senate red, has racked up $180mn of losses in his last five and a half years running the Nasdaq-listed aerial firefighting company Bridger Aerospace.
There’s a risk it goes bust between Sheehy winning next week and becoming one of the wealthiest men to enter the Senate in January. With the US fire season drawing to a close, results that will indicate Bridger’s ability to survive until the next one are due later in November.
Which raises a question of what counts as success or failure in the view of the historical party of American business?
The 37-year old former Navy Seal has put Bridger at the heart of his campaign as a “job creator”, in a race likely to determine control of the US upper House, and with it the ability of a Trump or Harris presidency to implement their agenda.
Mike Berg, a Republican communications director, blamed Sheehy’s opponent for Bridger’s woes. The three-term Democratic incumbent Jon Tester was “trying to destroy Tim Sheehy’s Montana business and disparage his service to our country to win an election. These last-minute smears won’t change the result,” he said, echoing the WSJ’s opinion page.
Readers might consider Sheehy’s role relevant, however. He founded Bridger in 2014 after leaving the Navy and ran it until July when he stepped down personally rich from a number of side-projects connected to the company.
There was also Blackstone, the world’s largest private equity firm, that extracted $290mn from Bridger in a series of transactions in 2022 which resulted in a $10mn bonus to executives including Sheehy, who was also released from a personal debt guarantee.
Chosen to run in part for his ability to self-fund, Sheehy lent $2.5mn to his own campaign in what is one of the most expensive races in Senate history. Billionaires have thrown much cash at the race, including Blackstone founder Stephen Schwarzman, who donated $5mn to the super PAC “More Jobs, Less Government” that has spent over $17mn supporting Sheehy.
Bridger on fire
The candidate, who holds a seven-point lead in the Real Clear Polling average, pitches Bridger as a success story and one Montana’s few listed companies.
Yet Bridger has violated debt covenants, sold stock to meet minimum cash reserve requirements this year, and its auditors have warned there is “substantial doubt about its ability to continue as a going concern”.
Its largest obligation is a $160mn municipal bond raised for industrial development with the help of a Montana local authority that was almost entirely used to cash-out prior Blackstone financing.
Sheehy himself has been dogged by a controversy about when and why he lied about a bullet wound; whether it was to hide a friendly-fire incident in Afghanistan, or to cover-up a potentially embarrassing self-inflicted injury in a National Park. He has also been accused of doctoring a contract in civil litigation by two former employees, allegations he has denied.
He took Bridger public in January 2023 by merging it with a special acquisition vehicle, a so-called Spac. From a high of $1bn on its first day of trading in January 2023, its market valuation has collapsed to $130mn.
John Coffee, professor at the Columbia Law School, said:
Spacs were designed as a substitute for initial public offerings that were supposed to be faster and less costly. They have instead become the bottom tier for the businesses that are most dubious.
The company operates a small fleet of surveillance and Super Scooper aircraft from Montana’s Bozeman Yellowstone airport to fight forest fires, typically when contracted by the US Fire Service.
Financial projections published in its 2022 bond prospectus overestimated Bridger’s future revenues and underestimated its expenses. The seasonality of firefighting meant that in some quarters the cost of interest on its debts was greater than revenues.
A Bridger spokesperson said:
Bridger Aerospace’s financial position is strong, our business continues to grow, and we continue to meet all our debt obligations. We posted record financial performance and contract awards in 2023, and we fully expect to continue building on that for the remainder of 2024 and beyond.
Sheehy’s campaign did not respond to requests for comment. Blackstone said it “helped support the expansion of Bridger’s life-saving mission fighting devastating wildfires in communities across the country”, that it does not support individual candidates, staff have donated to both sides in Montana and that “all political donations by our employees are strictly personal”.
Blackstone’s well-timed exit
Sheehy’s side projects included investing in a business that provides training to Bridger’s pilots. He also sold and leased planes to Bridger, including contracts agreed for two aircraft shortly before he announced his Senate bid that pays him $1.7mn a year.
A person close to Bridger said the high valuation of the 15-year old planes — 60 per cent above JetNet’s Aircraft Bluebook estimate — reflected the worth of specialist avionics equipment in the aircraft.
The most successful related business was Ascent Vision, a specialist in aerial surveillance and anti-drone technology spun out of Bridger in 2015 and sold to a defence group for $350mn in 2020.
Blackstone put $105mn into Bridger between 2018 and 2020, for a quarter of the company, two board seats, and $105mn worth of preference shares that accrued interest over time.
With the private equity group’s support, which included around $50mn of further financing that accumulated interest at a high-teens rate, Bridger invested in planes and property and increased revenues rapidly.
Then in 2022, the year before it went public, Bridger raised $460mn; $300mn of preference shares sold to new investors and the $160mn municipal bond.
Two-thirds of the influx went to cashing out Blackstone’s preference shares: the firm almost doubled its money, while retaining its equity stake.
A further $15.5mn went to repaying lending by insiders. Fees came to $19mn, not including $10.1mn of bonuses paid to Bridger’s senior management in connection to the transactions.
Sheehy, his brother who chaired Bridger’s board, and another executive, purchased $10mn of Bridger debt during the municipal bond issue. Such a large anchor investor can help to reassure potential investors during the process of raising money.
Bridger ended 2022 having lost $42mn, and with net debt of $178mn. The merger with a Spac to go public in January 2023 raised no fresh cash. In a quirk common to the process, the public vehicle’s shareholders voted to approve the deal while simultaneously requesting virtually all of their money back. Bridger paid a net $3.6mn for Sheehy to be the head of a Montana public company which lost $77mn that year.
Auditing angst
During 2023, on September 8, the head of Bridger’s audit committee resigned from the board, “as a result of the functioning” of that committee, the notice said.
Six days later the company purchased a local start-up called Ignis Technologies for $12mn in cash and stock. The announcement omitted to mention that Ignis had operated from Bridger’s basement for the preceding nine months, a fact obscured by providing different addresses for the two companies.
This April Bridger’s auditor warned that recurrent losses, negative cash flow and a lack of liquidity to fund operations raised substantial doubt about its future. Blackstone’s Todd Hirsh resigned from the board the following month, and the firm waived its right to appoint new representatives. Sheehy left in July.
In August Bridger reported losing $30mn in the first half of 2024. It had $8.6mn of cash on hand, all of it raised from shareholders this year, against $25mn of short term liabilities.
In recent weeks Bridger’s share price has recovered from lows, seeing an influx of buyers at the same time as whales have moved prices in political prediction markets. Shareholder enthusiasm could help Bridger raise more capital to address its debt load and winter cash needs and so keep flying.
New chief executive Sam Davis told investors that with an active fire season in the third quarter “we do believe this is enough to sustain operations until the next fire season.”
Results for that period, which will show whether his belief is well founded, will arrive after Montanans vote.
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