Objections may delay Aeroméxico’s bankruptcy exit plan

Grupo Aeroméxico has asked the US bankruptcy court in New York to extend until December 30 the exclusivity period during which it may file its final restructuring plan and to extend until February 28 the exclusive solicitation period, according to a court filing.

This follows an objection to the proposed financing plan by a group of US creditors including Invictus Global Management, LLC; Corvid Peak Capital Management, LLC; Hain Capital Group, LLC; and Livello Capital Management, LP (together referred to as the Ad Hoc Group) filed with the court on November 26.

“The court should not approve the exit financing motion in the face of the alternative proposal developed by the Ad Hoc Group, which provides a consensual path towards exiting Chapter 11 while at the same time distributing value fairly across the capital structure, including to fulcrum general unsecured claims holders and increasing plan value by USD450 million,” the objection to the court reads.

The Ad Hoc Group argues the existing proposal from the debtors was not the best path forward, failed to deliver consensus, and did not maximise the value for all of the key creditor groups. Their alternative proposal, they say, “provides Delta Air Lines (DL, Atlanta Hartsfield Jackson) and Apollo Global Management – [together the largest stakeholders in the Aeroméxico restructuring] – with identical or improved treatment while ensuring a consensual framework for a near-term emergence by general unsecured creditors meaningful participation and reasonable recoveries in the reorganised company”.

According to the Ad Hoc Group, their plan had been shared with Aeroméxico, unsecured creditors, Apollo Global Management, Delta Air Lines, and main Mexican investors on November 21, but was not considered. In light of this, the group was investigating “whether the process leading to the existing proposal was tainted by other considerations”.

In a letter soliciting the support for their objection from the boards of Delta Air Lines and Apollo Global Management, Global Management co-founder and partner, Cindy Chen Delano, and Corvid Peak Capital Management founder and Chief Investment Officer, Mark Black, warned: “This restructuring could be on the verge of devolving into protracted litigation because value is not currently being distributed in a lawful manner consistent with decades of well-established bankruptcy precedent. In particular, we believe the value going to unimpaired claimants and third-party investors is excessive and undermines a consensual exit”.

Delta is Aeromexico’s largest equity holder at almost 50% and Ed Bastian, its chief executive officer, sits on the Mexican carrier’s board. Apollo provided the USD1 billion debtor-in-possession (DIP) financing (of which the USD800 million tranche provides Apollo with significant case-control through its unprecedented equity conversion option).

“Thanks to the unique exit financing terms you have collectively aligned on, you are both positioned to receive exceptional recoveries and retain substantial equity in the reorganised company. You also stand to receive representation on the board of directors of the reorganised debtors and maintain continued influence. We are asking that your interests and influence in these cases now be applied to ensuring that there is a fair and consensual path forward for all stakeholders – rather than one marred by conflicts of interest and opacity,” the letter reads.

Prior to the motion for an extension, Grupo Aeroméxico, on November 29, filed a revised version of its reorganisation plan and accompanying disclosure statement reflecting the final terms of the previously disclosed joint proposal from lenders under Tranche 2 of the company’s DIP financing facility, known as the “Alliance Proposal”. A hearing on the disclosure statement is currently scheduled for December 6, 2021, and contemplates a confirmation hearing being held on January 17, 2022.

In their motion for an extension to December 30, the debtors argue it will permit them to seek consensus on the plan and timeline currently contemplated “without the unnecessary contentious confirmation process and unavoidable delay that a competing plan would produce”.

“The debtors submit that the revised plan filed on November 29, 2021, constitutes a ‘viable’ plan. Through intensive and lengthy negotiations, which included the debtors and various key constituencies engaging in a mediation before the Honourable Sean H. Lane, the debtors have garnered broad creditor support for the plan, as well as the support of critical counterparties and other stakeholders. The debtors are not seeking to extend exclusivity to pressure or prejudice their stakeholders; rather, the relief requested herein is intended to maintain a framework conducive to an orderly, efficient, and cost-effective emergence process,” the debtors argue.