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As Aeromexico aims for bankruptcy exit, junior creditors decry reorg plan

01/26/2022 | 05:01am EDT
FILE PHOTO: An Aeromexico Boeing 737 MAX 9, part of the new airplanes incorporated to its fleet, is pictured at the Benito Juarez International airport, in Mexico City

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

The Mexican airline, after nearly two years in bankruptcy, will make its case for the plan in a New York bankruptcy court on Jan. 27.

Aeromexico, which in June 2020 filed for Chapter 11 protection in the United States with $2 billion in debt, says it has secured the votes needed from its creditor classes to move forward with the deal despite lingering objections from some groups.

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, the largest stake https://www.reuters.com/business/aerospace-defense/aeromexico-shareholders-back-capital-increase-restructuring-plan-2022-01-17 in the company. But the committee representing general unsecured creditors, some of whom could see just pennies on the dollar, says the plan unfairly benefits insiders.

The committee, which includes a pilots union, Falko Regional Aircraft Limited, Nordic Aviation Capital and the trustee to a group of noteholders, argues that the deal must be held to higher standards than a typical Chapter 11 settlement because insiders are involved.

It said the voting results only show one class of general unsecured creditors in support of the plan because the company used a "loophole" to value certain claims lower than what the creditors say they are worth. Aeromexico, however, said creditors could have challenged that arrangement before the voting procedures were approved but failed to do so.

The plan improperly gives insiders a chunk of the reorganized entity's equity, the committee said. That value, the committee asserts, is coming "primarily out of the recoveries" of junior creditors.

The insiders that the committee takes issue with are Delta, which was Aeromexico's majority shareholder and is slated to emerge from the deal with a 20% stake https://www.reuters.com/article/aeromexico-bankruptcy/delta-to-receive-20-of-new-shares-of-aeromexico-under-restructuring-plan-idUSKBN2I720W, and four Mexican individual shareholders who are also board members.

The committee argued in court papers that neither Delta nor the four individuals have provided adequate contributions to the restructuring in exchange for that equity.

"We have supported Aeromexico throughout the chapter 11 process and our proposed participation in the plan of reorganization would help Delta optimize our long-term relationship with Aeromexico, provide substantial benefits to our customers and secure many jobs for our people," a Delta spokesperson said.

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

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

Another group of unsecured creditors, including Invictus Global Management, also filed papers urging the judge overseeing the bankruptcy to reject the plan. They also argue that the Aeromexico plan was "dominated by conflicted insiders."

Though Invictus opposes the plan, the judge recently ruled that it could not use $47.3 million in claims it purchased last summer to vote against the plan because the prior holders of the claims had already committed to supporting the deal. Invictus is appealing that ruling.

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.

(Reporting by Maria Chutchian, Editing by Alexia Garamfalvi and Bill Berkrot)

By Maria Chutchian

© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN AIRLINES GROUP INC. -0.18% 16.55 Delayed Quote.-7.85%
APOLLO GLOBAL MANAGEMENT, INC. -1.27% 53.51 End-of-day quote.-26.12%
BRITISH POUND / US DOLLAR (GBP/USD) 0.12% 1.2325 Delayed Quote.-9.79%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.12% 0.77899 Delayed Quote.-2.07%
DELTA AIR LINES, INC. -0.42% 38.17 Delayed Quote.-2.33%
EURO / US DOLLAR (EUR/USD) 0.19% 1.0438 Delayed Quote.-8.42%
GRUPO AEROMÉXICO, S.A.B. DE C.V. -1.16% 340 End-of-day quote.12,130.22%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.46% 0.012852 Delayed Quote.-3.84%
LATAM AIRLINES GROUP S.A. -5.33% 378.7 End-of-day quote.16.07%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.11% 0.63123 Delayed Quote.-8.10%
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Sales 2022 60 943 M 3 035 M 3 035 M
Net income 2022 1,38 M 0,07 M 0,07 M
Net Debt 2022 65 131 M 3 244 M 3 244 M
P/E ratio 2022 33 714x
Yield 2022 -
Capitalization 46 454 M 2 314 M 2 314 M
EV / Sales 2022 1,83x
EV / Sales 2023
Nbr of Employees 13 029
Free-Float 100%
Duration : Period :
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Technical analysis trends GRUPO AEROMÉXICO, S.A.B. DE C.V.
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Mean consensus SELL
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Andrés Conesa Labastida Chief Executive Officer & Executive Director
Ricardo Javier Sánchez Baker Chief Financial Officer & Executive Vice President
Francisco Javier de Arrigunaga Gómez del Campo Chairman
James W. Sarvis Chief Operations Officer & Executive VP
Claudia Angélica Cervantes Muñoz Senior Vice President-Legal Affairs & Compliance
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