NBC News: Tim Sheehy’s Firm Promised Jobs and More to a Montana County. It’s Still Waiting.
FOR IMMEDIATE RELEASE
Tuesday, October 22, 2024
CONTACT
rehm@mtdems.org
NBC News reveals that Tim Sheehy’s company failed to deliver on key promises, like job creation and airplane hangars, after receiving a $160 million bond from Gallatin County
Helena, MT – New investigative reporting from NBC News showed that Tim Sheehy’s company failed to deliver on key promises, like job creation and constructing new airplane hangars, after securing a $160 million bond from Gallatin County.
And as Sheehy’s company risks defaulting on that bond amid financial struggles and millions in losses, Gallatin County could take a hit to its credit – increasing “costs of borrowing to pay for schools, roads and other services.”
As NBC News reports: “Four years after the meeting where the Bridger executives made their pitch, only one of the two new hangars has been built. The company’s cash flow has also failed to meet the threshold it had promised bondholders it would maintain, securities filings show. The number of workers Bridger employs has declined.”
Read more:
NBC News: Tim Sheehy's firm promised jobs and more to a Montana county. It's still waiting.
By Gretchen Morgenson
October 22, 2024
Bridger Aerospace Group, a Montana-based aerial firefighting company helmed by Tim Sheehy, a former Navy SEAL, was losing money in 2020 when its top executives made a business pitch to elected officials in the county where it’s based.
At a recorded public meeting, the executives asked whether Bridger could use Gallatin County’s name and pristine credit rating to raise $160 million in a municipal bond offering. If the three county commissioners said yes, Bridger would gain access to lower-cost money to expand its operations.
Gallatin County would also benefit from the deal, company officials promised. The money, they said, would be used to hire more workers, build two airplane hangars at the Bozeman airport with a local construction company and increase firefighting capacity in the region. And if the worst were to happen and Bridger defaulted on the debt, Gallatin County wouldn’t be on the hook.
Some of the county commissioners expressed hesitancy, the recording shows. Bridger was a startup — just over five years old — one pointed out; another said the county had never done a deal like that at such a scale.
Four years later, Bridger is still losing money, its securities filings show, and the $160 million bond deal that sprang from that 2020 meeting is under scrutiny as Sheehy vies for a seat in the U.S. Senate.
But some of the benefits that Bridger officials predicted Gallatin County would reap as a result of the deal haven’t come to fruition. After it issued the bonds in 2022, securities filings show, Bridger used the vast majority of the money it got to pay off previous investors.
All told, $134 million of the $160 million in proceeds left Montana and landed in the New York City coffers of the Blackstone Group, a prestigious private equity firm that previously invested in Bridger. The bond offering disclosed the information, and Blackstone didn’t dispute the calculation.
Four years after the meeting where the Bridger executives made their pitch, only one of the two new hangars has been built. The company’s cash flow has also failed to meet the threshold it had promised bondholders it would maintain, securities filings show. The number of workers Bridger employs has declined, according to its most recent figures.
Justin Marlowe, a research professor at the University of Chicago Harris School of Public Policy and director of its Center for Municipal Finance, said such deals can harm local governments.
“When, where and how benefits accrue locally when local governments support these types of business ventures is exactly the right question to ask,” Marlowe said. “If the project fails, it sends a signal about the future of that jurisdiction.”
Sheehy, who stepped down as CEO of Bridger in July, declined to be interviewed for this article, and his press secretary didn’t respond to detailed questions.
A Bridger spokeswoman said that the company is working to repair its cash flow problems and that the bonds are backed by “robust collateral which has appreciated significantly in value since the bond was issued.” Using the bond money to pay off Blackstone is a common practice companies use, she said, to replace “higher-cost and more restrictive financing.” The spokeswoman didn’t provide details about the collateral or how the company had calculated its appreciation.
Still, the company has reported almost $150 million in losses since the bond issue in July 2022, and its stock price at Monday's close was $3.60, down 64% from when it became public in January 2023. The S&P 500 is up 44% since then.
As Sheehy has campaigned on Bridger’s success, his company’s financial standing has wobbled, raising questions about its ability to pay interest and principal on the bonds Gallatin County helped it raise.
Bridger’s independent auditor recently warned that Sheehy’s company may not have the resources to continue operating over the next 12 months. Academic research shows that 17% of companies receiving such auditor warnings file for bankruptcy within a year; that compares with 1.8% of distressed companies that default within one year.
At the same time, even though Gallatin County isn’t financially liable if Bridger defaults on the bonds, its stellar credit rating could take a hit, experts said. That would increase its costs of borrowing to pay for schools, roads and other services.
As of August, only one of the two hangars Bridger said would be built with the bond money has been erected; construction on the other hadn’t started, its securities filings show. As for new jobs, the number of workers the company employed fell to 148 in December, the most recent month for which figures are available, down 11% from the previous year.
In July 2022, the month Bridger began receiving the proceeds of the bond issue, it spent $3.85 million to buy a small, single-engine aircraft, a Pilatus PC-12, from Sheehy, then the CEO, securities filings show.
The company paid Sheehy $850,000 more than what he spent when he bought it a year earlier, the filings show. Bridger also had to repair and upgrade the aircraft for operational use, filings show.
Bridger’s spokeswoman said none of the bond proceeds were used to buy the plane. Sheehy’s campaign didn’t respond when it was asked why he considered the company’s purchase of a plane he owned a good use of the company’s capital.
Records show that the discussion of the Bridger bond issue at the October 2020 Gallatin County commissioners meeting issue lasted 45 minutes.
Two items didn’t come up in the discussion. One: the fact that Bridger’s financial results had already fallen below a threshold it had promised a private lender it would maintain, securities filings show. Asked why Bridger’s executives didn’t bring up that detail at the meeting, the spokeswoman didn’t respond.
The second item that wasn’t publicly discussed involved collateral damage to Gallatin County if Bridger’s bonds, known as conduits, went bad. If Bridger defaulted on the bonds, the county’s borrowing costs could rise.
Such outcomes have happened to other communities backing conduit bonds, said Marlowe, of the University of Chicago. “In a couple of recent cases, the market has looked at these kinds of issuances when there has been a default and said, ‘In fact, even though you don’t have a financial obligation, there is a moral obligation or indirect obligation,’” he said.
He pointed to a case last year when ratings giant Standard & Poor’s downgraded the credit rating of a Chicago-area municipality after the default of a bond issue similar to Bridger’s.
The municipality, the village of Bolingbrook, didn’t cover the missed payments, and S&P said the default represented “a weak risk management, culture, and oversight governance” at the municipality. The downgrade made it more expensive for the village to borrow money going forward.
That just one of the Bridger hangars has been built also poses potential problems for bondholders, according to the offering statement. Noncompletion of the financed hangars, it said, “would materially adversely affect the value of the security under the Leasehold Deed of Trust.”
The Bridger spokeswoman didn’t respond to a question about whether bondholders should be concerned about that. The second hangar was estimated to cost $14.4 million, securities filings show.
###
