Aeromexico files new plan, but some creditors seek alternative route

By Sarah Lizee

Olympia, Wash., Nov. 29 – Grupo Aeromexico, SAB de CV filed an amended Chapter 11 plan and disclosure statement on Monday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the company said it would file the new plan after it had received a joint proposal from the lenders under tranche 2 of its debtor-in-possession financing facility and from existing creditors and new money investors.

The company said that the proposal has the support of strategic partner Delta Air Lines and provides an implementable solution, through a solid group of long-term Mexican investors, to comply with foreign ownership requirements.

Under the amended plan, about $1.3 billion of financing will be raised. The committed parties, excluding Delta and the Mexican investor group, will purchase or fund $600 million in new equity, representing 26.9% of all new issued shares, and $762.5 million in senior secured first-lien notes. About $575 million of the notes will be used to repay tranche 1 of the DIP facility, to fund working capital and for general corporate purposes, and to fund cash distributions to unsecured creditors.

Delta will subscribe and pay for $100 million of new shares and will be required to convert all fully accrued amounts of its tranche 2 loans into new shares at plan equity value. In exchange, Delta will get 20% of all new shares issued under the plan. Also, any or all portions of Delta’s claims against the debtors will be allowed and satisfied under the Chapter 11 plan, and any distributions of new shares on those claims will be added to Delta’s ownership interest.

Apollo Management Holdings will get $150 million in cash, accrued interest under the DIP credit agreement on the outstanding debt under the tranche 2 loans starting on Dec. 31, and 22.38% of all new shares.

Mexican Pension Fund tranche 2 DIP loans will be converted into 3.54% of all new shares.

A cash pool of $450 million will be distributed to unsecured creditors.

Alternative plan

Meanwhile, an informal group of OpCo creditors has objected to the plan and said it has an alternative proposal that provides a consensual path toward 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 $450 million.

“The debtors’ proposed exit financing is not the debtors’ only or highest and best path forward,” the group said in its objection.

The group said its alternative plan improves or leaves unaltered the negotiated economic rights of certain key parties, including Delta, Apollo, and significant Mexican shareholders, and provides markedly improved recoveries for the fulcrum class or general unsecured claimholders, increasing the recovery range to up to 29% to 31% from 14% to 14.5%.

The alternative plan also has a 20% commitment premium reduction, and a $100 million to $200 million increase in excess cash at exit.

The alternative proposal also treats bondholders and “double dip” claimants fairly by paying them in full in cash, and rendering them unimpaired, the group said.

“The debtors’ existing proposal fails to deliver consensus and is not value maximizing for all of the debtors’ key constituencies,” the group said.

“Instead, the existing proposal benefits bondholders and ‘double-dip’ claimants that are already being paid in full and shifts significant value to third-party investors without any claims in these Chapter 11 cases, at the expense of fulcrum GUC holders, who are left receiving a meager recovery and no right to participate in the new equity.”

The group said that the debtors have not engaged with it regarding the alternative plan, however.

Grupo Aeromexico, a holding company for commercial aviation, is based in Mexico City. The company filed Chapter 11 on June 30, 2020 in the U.S. Bankruptcy Court for the Southern District of New York under case number 20-11563.

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