Grupo Aeromexico SAB cut a last minute deal with the main group of its unsecured creditors, easing the way for the airline to seek final approval to exit bankruptcy from a judge in New York.
The official committee of unsecured creditors in the company’s Chapter 11 case agreed to join more senior debt holders who back the plan, including Apollo Global Management Inc. and Delta Air Lines Inc. In return, unsecured creditors will get a note for $40 million, contingent on future performance.
The agreement means the only opposition the company faces to its proposal to slash $1.1 billion of debt is a smaller group of unsecured creditors lead by Invictus Global Management and Corvid Peak Capital Management. That group objects to the reorganization proposal, which would hand ownership stakes to senior debt holders Apollo and Delta.
The deal was announced at the start of a court hearing in Manhattan being overseen by U.S. Bankruptcy Judge Shelley Chapman. Chapman will hear final arguments about the proposal and then decide whether to approve the reorganization plan and allow Aeromexico to exit bankruptcy.
The court adjourned on Thursday afternoon and will reconvene Friday at 10 a.m. Eastern.
The plan would cut $1.1 billion of debt and hand Apollo and other top lenders an ownership stake. Apollo would also collect $150 million in cash. At the start of the bankruptcy, Apollo orchestrated a $1 billion rescue plan that helped keep the struggling airline afloat during its Chapter 11 case.
Plan Objections
The hearing is likely the final courtroom showdown between the Invictus group and Aeromexico over the plan. Most creditors voted to support the proposal, according to court documents. The holdouts argue that the bankruptcy-exit plan undervalues the airline in order to benefit Apollo and Delta.
The plan should be rejected because it wrongly rewards some creditors with a chance to buy the new stock without giving similar debt holders the same option, Mike Comerford, a lawyer with the Invictus group, said during the hearing. The plan also gives improper retention bonuses to four Aeromexico insiders in violation of the bankruptcy code, Comerford argued.
Apollo, which led the debtor-in-possession financing, will retain a 22.38% stake while Delta will have 20%. A group of Mexican investors will hold a 4.1% stake, while the remaining shares will be distributed among new investors and creditors.
Earlier this month, shareholders approved an equity increase for $4.27 billion. The carrier will issue 682.1 billion new shares to be paid by capitalizing $3.4 billion in liabilities and injecting $828 million.
Chief Executive Officer Andres Conesa, Chief Financial Officer Ricardo Sanchez Baker and Chairman Javier Arrigunaga will remain in their current roles, according to the plan. Two additional board seats will be filled at a later date.
Aeromexico shareholders had also previously confirmed Arrigunaga, Valentin Diez Morodo, Antonio Cosio Pando, Jorge Esteve Recolons, Eduardo Tricio Haro, William Easter III and Conesa as board members. New to the board are Apollo’s Antoine Munfakh and Bogdan Ignaschenko, as well as Delta’s Glen Hauenstein and Andres Borrego from Credit Suisse.
Aeromexico filed bankruptcy in 2020 during the pandemic.
The case is Grupo Aeromexico, S.A.B. de C.V., 20-11563, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
