As Aeromexico eyes exit from bankruptcy, junior creditors denounce reorganization plan


Jan 26 (Reuters) – Grupo Aeromexico SAB de CV (AEROMEX.MX) is nearing the finish line of its restructuring with a proposed plan to reduce debt by more than $1 billion, but must first overcome the opposition from junior creditors who say existing shareholder Delta Air Lines (DAL.N), among others, is profiting from the deal at its expense.

The Mexican airline, after nearly two years in bankruptcy, will argue the plan in New York bankruptcy court on January 27.

Aeromexico, which in June 2020 filed for Chapter 11 protection in the United States with $2 billion in debt, says it has won the necessary votes from its creditor classes to move forward with the deal despite objections. persistence of certain groups.

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The plan, which Aeromexico says will result in a total enterprise value of $5.4 billion and preserve 13,000 jobs, would give its largest creditor, Apollo Global Management (APO.N), the biggest stake in the business. But the committee representing general unsecured creditors, some of whom could only see pennies on the dollar, say the plan unfairly benefits insiders.

The committee, which includes a pilots’ union, Falko Regional Aircraft Limited, Nordic Aviation Capital and the trustee of a group of ticket holders, argues that the agreement must be subject to higher standards than a typical settlement of the chapter 11, because insiders are involved.

He said the voting results show only one category of general unsecured creditors in support of the plan, as the company used a ‘loophole’ to rate some claims lower than what creditors say what they are worth. Aeromexico, however, said creditors could have challenged that arrangement before voting procedures were approved, but did not.

The plan wrongly gives insiders a share of the reorganized entity’s equity, the committee said. This value, the committee says, comes “primarily from collections” from junior creditors.

The insiders the committee is challenging are Delta, which was Aeromexico’s controlling shareholder and is expected to exit the deal with a 20% stake, and four individual Mexican shareholders who are also board members.

The committee argued in court documents that neither Delta nor the four individuals had provided adequate contributions to the restructuring in return for that participation.

“We have supported Aeromexico throughout the Chapter 11 process and our proposed participation in the reorganization plan would help Delta optimize our long-term relationship with Aeromexico, deliver substantial benefits to our customers and secure many jobs for our staff,” a Delta spokesperson said. .

The committee said it would support a plan that includes some distribution to insiders as long as it provides fair recoveries for unsecured creditors.

Aeromexico and committee representatives did not immediately respond to requests for comment.

Another group of unsecured creditors, including Invictus Global Management, also filed documents urging the bankruptcy judge to reject the plan. They also argue that Aeromexico’s plan was “dominated by conflicted insiders”.

Although Invictus opposes the plan, the judge recently ruled that he could not use $47.3 million in claims purchased last summer to vote against the plan because former claim holders had already committed to supporting the agreement. Invictus is appealing this decision.

Aeromexico was one of three major Latin American airlines to file for bankruptcy in the United States in 2020, alongside Colombia’s Avianca SA and Chile’s LATAM Airlines Group SA.

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Reporting by Maria Chutchian, editing by Alexia Garamfalvi and Bill Berkrot

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