Jan 27 (Reuters) - Grupo Aeromexico has reached a
$40-million deal with a group of unsecured creditors to withdraw
their objection to the airline's bankruptcy restructuring plan,
Aeromexico's lead counsel said on Thursday.
The move is the first step in what is likely to be a
days-long Chapter 11 bankruptcy hearing out of New York. Despite
the agreement with the unsecured creditors' committee,
objections still remain from an ad hoc group of junior
creditors, most notably Invictus Global Management.
As part of the deal, Aeromexico offered the
unsecured creditors potential distributions from a four-year,
$40-million "contingent value right" note which would dole out
cash distributions as long as Aeromexico outperforms its
targets, counsel Timothy Gaulich of Davis Polk & Wardwell said.
"That is very good news indeed," U.S. Bankruptcy Judge
Shelley Chapman said after the deal was announced.
Aeromexico, which filed for Chapter 11 bankruptcy protection
in New York in June 2020, on Thursday began making its case to
Chapman for its restructuring proposal, which would infuse new
capital into the company and make Apollo Global Management
, a frequent investor in distressed companies, the
Though the airline has lined up the support it says it needs
from its multiple creditor groups, some still say the plan
should not be approved unless junior creditors, some of whom may
see just pennies on the dollar, receive better recoveries.
Chapman, who did not rule on the plan on Thursday, has set
aside several days for the hearing, which is set to resume on
Friday. If she ultimately approves the deal, Aeromexico - one of
three major Latin American airlines that filed for bankruptcy
during the pandemic - will be able to exit bankruptcy.
The plan, according to the airline, would reduce its debt
by$1 billion and save around 13,000 jobs. But some junior
creditors argue it is overly beneficial to existing
shareholders, including Delta Air Lines Inc and four
board members, at their expense.
Delta and the four Mexican individuals are in line to
maintain some equity in the reorganized company. Delta, which is
expected to hold around 20% of the company after the
restructuring, has said the plan's approval is critical to
maintaining its long-term relationship with Aeromexico.
(Reporting by Maria Chutchian; Editing by Bill Berkrot,
Christian Plumb and Aurora Ellis)