During the first day of the confirmation hearing of its restructuring plan under Chapter 11, Aeroméxico reached an agreement with the group of creditors Ad Hoc, which last night filed an objection before the Bankruptcy Court of the Southern District of New York. York regarding the airline’s reorganization plan.
The Ad Hoc group (composed of the firms Invictus Global Management, Corvid Peak Capital Management LLC, Hain Capital Group and Livello Capital Management) pointed to “unfair conditions” for the recovery of creditors, incentive payments to directors not allowed, and a preference in the distribution of what will be the new shares.
As part of the deal, Aeromexico offered unsecured creditors possible distributions from a four-year “contingent value right” note, which would dole out cash allocations whenever Aeromexico exceeds its targets, said attorney Timothy Gaulich of Davis Polk & Co. Wardwell, according to the Reuters news agency.
“This is very good news,” Judge Shelley Chapman, who is handling the case, said after the settlement was announced.
The group of creditors considered that several points of the airline’s restructuring plan do not comply with the provisions of the US Bankruptcy Code, for which they requested the Court to make several changes before its approval.
“The plan, as currently presented, demonstrates how, when left unsupervised, powerful insiders (incentivized to preserve their substantial ownership interests) can team up with a select number of investors to engineer a restructuring that shifts the value of unsecured creditors to themselves,” the creditor group said in a preliminary statement.
The document presented to the Court reported six objections to the restructuring plan derived from what it considers to be breaches of the Bankruptcy Code,
Among these, an alleged violation of the Code stood out by not offering “the same recovery opportunity” for all unsecured creditors, by ensuring that some obtain a financial recovery up to 50% greater than others.
The group of creditors also warned of a violation by contemplating non-permitted transfers of value to some members of the Aeroméxico board of directors, with the aim of continuing to serve them.
Specifically, reference was made to the distribution of 4.1% of the new shares to be issued to four current members of the board: Eduardo Tricio Haro, Antonio Cosío Pando, Valentín Diez Morodo and Jorge Esteve Recolón, thus, of this amount, 3.2% ( valued at $82 million) would be paid “in consideration of certain agreements to be made with the company, and in connection with service as members of the new board.”
“This proposed transfer of $82 million in value to four directors is an overpayment for the mere retention of these individuals in the debtors’ businesses,” the creditors say in the objection.
This was added to an indication of the Delta contract rate, until now a shareholder of 49% of the capital of Aeroméxico. The group of creditors warns that the distribution of 20% of the new shares proposed for Delta “is designed” to ensure “its ownership interest.”
The confirmation hearing for Aeroméxico’s restructuring plan began today after being postponed from its original date, on January 18.
With information from Reuters
