Southern Air receives interim access to $12.5 million DIP facility

By Jim Witters

Wilmington, Del., Oct. 1 - Southern Air Holdings, Inc. received approval for interim access to $12.5 million of its $25 million debtor-in-possession financing facility during an Oct. 1 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The approval came over the objection of Jane Leamy of the U.S. Trustee's Office, who said one of the fees included in the DIP agreement was premature and should be carried over to the final DIP hearing.

In question was a fee of 5% of the value of the reorganized debtors. The fee is due to the DIP lenders when the judge enters the interim DIP order.

Leamy said the fee is unusual and warrants review after appointment of an official committee of unsecured creditors.

Attorney Mark Collins, representing lender Canadian Imperial Bank of Commerce, New York Agency, told the court that the fee and a $37.5 million roll-up were included in the DIP agreement as an inducement to the prepetition lenders to inject $25 million in new money into the company.

Judge Peter J. Walsh said that the fee is "out of the ordinary, but not unreasonable."

DIP terms

As previously reported, Southern Air secured a commitment for $25 million in DIP financing from its lender group to provide liquidity during the restructuring process.

Interest on non-roll-up loans will be either Base rate plus 700 basis points or Libor plus 800 bps with a 250 bps Libor floor.

Interest on roll-up loans will be either Base rate plus 400 bps or Libor plus 500 bps with a 100 bps Libor floor.

The facility will mature on the earliest of 180 days after the entry of the interim order, 45 days after entry of the interim order if a final order has not been entered by that date, conversion or dismissal of the Chapter 11 case, acceleration of the loans and termination of commitments and the effective date of a plan of reorganization.

Also during the hearing, judge Walsh approved the remainder of the routine first-day motions, which were presented with no objections.

Southern Air, a Norwalk, Conn.-based cargo carrier, filed for bankruptcy on Sept. 28 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 12-12690.

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