Grupo Aeroméxico hunts for new lender for rescue – report

Grupo Aeroméxico is in talks with potential lenders that could replace New York-based investment firm Apollo Global Management in its bankruptcy rescue, sources close to the development have told Bloomberg News. In August 2020, the Aeroméxico (AM, México City Int’l) parent secured USD1 billion in debtor-in-possession (DIP) financing – a form of funding for companies undergoing restructuring – with affiliates of Apollo Global Management. When the carrier emerges from bankruptcy, Apollo will be able to covert the loan into shares. The negotiations, expected to continue this week, are aimed at calculating an accurate valuation of the struggling company once it reemerges, according to one of the anonymous sources. Apollo is aware of the talks, the sources added, and has the “right of first refusal” to choose whether or not to accept an offer to be replaced as lender. If Apollo opts to stay on and swap its loan for equity, the new valuation would be used to ascertain the price at which it would do so, the sources explained. The loan consists of two preferential and guaranteed tranches, the first for USD200 million and the second, convertible into capital, for USD800 million. Minority bondholders participated in the first tranche only, and they also have the option to convert their loans into shares. Grupo Aeroméxico requested judicial protection on June 30 last year. Almost a year later, on June 8, 2021, it asked for an extension of the deadline to file its Chapter 11 restructuring plan, from June 25 to October 25, explaining that it still had to meet a number of conditional thresholds related to the DIP financing, such as submitting a valuation. “The months ahead will be focused on many time-consuming tasks,” it said in the motion filed at the US Bankruptcy Court for the Southern District of New York, adding that as well as the valuation and coming up with the restructuring plan it will also have to resolve issues related to its loyalty scheme. A further complication for the airline is the US Federal Aviation Administration (FAA) decision last month to downgrade Mexico’s safety rating from Category 1 to Category 2, as Mexican carriers cannot now add frequencies or routes to the United States. Aeroméxico and Apollo were not immediately available for comment.