Southern Air files second amended joint plan, disclosure statement

By Jim Witters

Wilmington, Del., Jan. 18 - Southern Air Holdings, Inc. tweaked the treatment of general unsecured creditors in its second amended joint plan of reorganization and associated disclosure statement, according documents filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

The general unsecured creditors, who previously were to receive no distribution, now may receive a share proceeds in a litigation trust that will be seeded with $2.5 million.

The amended plan and disclosure statement resulted from objections raised by the official committee of unsecured creditors after the court approved the previous disclosure statement on Dec. 18.

A hearing to consider the amended disclosure statement is scheduled for 10 a.m. ET on Jan. 29.

The plan confirmation hearing has been rescheduled to March 14 from Feb. 14.

Plan details

The second amended plan of reorganization calls for the creation of a limited liability corporation named Cargo 360, LLC, the membership interests of which will be held by Cargo 360 or Reorganized Cargo 360.

On the plan effective date, all of the capital stock in Southern Air and Air Mobility will be contributed to Cargo LLC.

Also on the effective date, Cargo LLC will enter into a senior secured exit facility consisting of the $20 million exit revolving credit facility and the exit term loans.

The exit term loans consist of $62.5 million to pay the DIP lender claims and $17.5 million to pay prepetition lender claims. The term loans carry an interest rate of Libor plus 7% or base rate plus 6% and mature in five years.

On the plan effective date, the company will issue 10 million shares of common stock of the reorganized Southern Air parent.

Treatment of creditors

Treatment of creditors under the proposed amended plan includes:

• Holders of allowed administrative claims and allowed priority non-tax claims will be paid in full in cash;

• Holders of allowed priority tax claims will be paid in full in cash on the plan effective date, in quarterly installments over a five-year period or under terms agreed to by the claimant, the debtors and the requisite lenders;

• Holders of other allowed secured claims will receive payment in full in cash, the proceeds of the sale of the collateral assets, the property securing the claim or other distributions under the bankruptcy code or agreed upon by the parties;

• Holders of allowed general unsecured claims may receive a share of $2.5 million the debtors will pay into a litigation trust and a share of any of the litigation trust's interests;

• Holders of allowed claims of $2,000 or more may elect to be treated as convenience claims. Holders of convenience claims will receive cash equal to 25% of the allowed claim;

• Holders of allowed general liability insured litigation claims will be allowed to proceed with the liquidation of the claim;

• Holders of allowed subordinated claims will receive no distribution;

• Preferred equity interests and holdings equity interests will be extinguished on the plan effective date;

• Cargo 360 equity interests, Southern Air equity interests and Air Mobility equity interests will be deemed in full force and effect;

• 21110 LLC, 21111 LLC, 21221 LLC, 21550 LLC, 21576 LLC, 21590 LLC, 21787 LLC, 21832 LLC, 23138 LLC, 46914 LLC, 24067 LLC, CF6-50 LLC Aircraft 21380 LLC and Aircraft 21255 LLC, equity interests will be extinguished, and the assets of 21110 will be distributed to reorganized Southern Air; and

• Intercompany claims will be reinstated to the extent determined appropriate by the debtors or be adjusted, continued or capitalized.

Southern Air, a Norwalk, Conn.-based cargo carrier, filed for bankruptcy on Sept. 28. Its Chapter 11 case number is 12-12690.

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