Global Aviation disclosure statement draws three parties' objections

By Jim Witters

Wilmington, Del., Oct. 12 - Global Aviation Holdings Inc.'s amended disclosure statement for its amended joint plan of reorganization drew objections from the official committee of unsecured creditors, the U.S. Trustee and GSO Capital Solutions, according to documents filed Oct. 12 with the U.S. Bankruptcy Court for the Eastern District of New York.

When it filed the plan and disclosure statement in September, the company said the plan is supported by its debtor-in-possession lenders, more than 80% of its senior secured noteholders and a majority of its unions.

Global Aviation said then that it planned to negotiate with other major stakeholders in the time leading up to the approval of the disclosure statement and in advance of the plan confirmation hearing in hopes of reaching a consensual resolution with its official committee of unsecured creditors and second-lien lender GSO Capital.

A hearing to consider the adequacy of the disclosure statement is scheduled for 11 a.m. ET on Oct. 17.

Creditors committee concerns

The creditors committee said it intends to continue negotiations with Global Aviation and believes a consensual resolution "is in the best interests of all creditors," but talks have not proved fruitful.

The committee says

• The disclosures made in the amended disclosure statement are inadequate. The statement fails to provide any information at all concerning intercompany claims and intercompany interests; and

• The debtors' proposed schedule for approval of the disclosure statement and confirmation of the first amended joint plan of reorganization "materially impairs the rights of the committee."

Critical information was withheld by the debtors until the "last possible moment before the deadline to object" to the disclosure statement.

"The debtors' decision to delay making crucial these disclosures is part of a larger effort by the debtors to impair the committee's ability to meaningfully evaluate the amended disclosure statement and the plan," the committee claims.

The committee is asking the court to defer approval of the amended disclosure statement until after all disclosure-related discovery is complete and the committee has been afforded a reasonable opportunity to analyze all disclosures.

Trustee objection

Tracy Hope Davis, the U.S. Trustee for Region 2, says the disclosure statement is deficient in the following ways:

• It does not provide adequate information about the debtors' current financial condition, including their cash position or their projected cash balance on the plan effective date;

• The amended disclosure statement and amended plan do not contain adequate information regarding administrative expense claims, including the fees and expenses of retained professionals;

• The statement and plan do not contain adequate information about the classes of claims under the plan, including the identity of the claimants and the total claims in each class;

• There is inadequate information about the new loans that are the means for implementing the plan;

• The disclosure statement and plan fail to provide justification for the payment of professional fees and expenses of the International Brotherhood of Teamsters and the Air Line Pilots Association through the plan;

• There is no legal basis provided for the proposed non-debtor third-party releases, exculpations, limitations of liability and injunctions under Second Circuit law; and

• There is inadequate information regarding the reorganized debtors' responsibility to pay the trustee fees, file post-confirmation quarterly reports and schedule post-confirmation status conferences.

The trustee is asking the court to deny approval of the amended disclosure statement.

GSO Capital objection

GSO asserts that the proposed plan "is a flawed attempt to transfer value from GSO ... to first-lien lenders, unions and management."

"Under the plan, first-lien lenders, who are owed approximately $200 million, will receive the majority of the debtors' new equity, in addition to $135 million in new secured debt. Employees of the debtors will receive 25% of the new equity, plus warrants for another 15%, and management will receive 10% of the new equity. GSO, which is owed approximately $100 million, stands to receive nothing," the objection states.

GSO says the proposed plan hinges on the debtors' valuation and financial projects, which are not mentioned in the disclosure statement.

"In contrast to the leisurely schedule that the debtors have allowed themselves in disclosing critical plan-related information, the debtors have sought to impose a breakneck litigation schedule on parties that wish to object to their plan: they have requested a Nov. 20 deadline for plan objections, and a Nov. 28 confirmation hearing. That schedule is plainly unworkable," GSO contends.

The debtors also have failed to provide "vital information regarding their proposed equity distributions to employees and management," according to the objection.

"Unless and until the disclosure statement is supplemented with such information, it should not be approved," according to the objection.

GSO says the debtors and their major stakeholders should be engaged in constructive negotiations concerning an equitable distribution of the debtors' value.

Global Aviation is a Peachtree City, Ga.-based provider of charter air transportation for the U.S. military and of commercial global passenger and cargo air transportation services. The company filed for bankruptcy on Feb. 5, 2012 under Chapter 11 case number 12-40783.

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