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May 29, 2020 – The Debtors filed a motion requesting each of a bidding procedures order and a sales order [Docket No. 69]. The bidding procedures order would approve (i) bidding procedures in relation to the sale of the Debtors’ assets, notably airport-based concession agreements (the “Sale”), including bidder protections and (ii) a proposed auction/sale timetable culminating in a June 24th auction and June 26th sale hearing. The sale order would authorize the Sale.
The Debtors are seeking an expedited auction and sale in what they are calling a "final effort to provide value to their stakeholders." The Debtors efforts to market concession agreements go back as far as 2018; and on March 12th, an "imminent deal" in respect of 15 of the Debtors' airport locations was derailed when a strategic buyer pulled out of that transaction citing the "severe and devastating industry-wide decline in rental demand" inflicted by COVID-19.
The Debtors' motion states: "The Debtors’ primary assets are certain concession agreements with airport authorities or other supervising governmental entities (the ‘Concession Agreements’), which agreements permit the Debtors to operate out of various airports located across the United States.
The Debtors typically acquire Concession Agreements through a competitive bidding process whereby the Debtors propose a minimum annual guaranteed payment (‘MAG’) to the applicable airport authority or supervising governmental entity, which is then paid on a monthly basis if the bid is successful. The Concession Agreements routinely have terms of up to 10-15 years and typically cannot be terminated without paying all MAGs and related rents for the remainder of the term of the Concession Agreement. In connection with the Concession Agreements, the Debtors typically enter into real property leases with the same airport authorities or supervising governmental entities, the lengths of which are meant to run concurrently with the terms of the Concession Agreements."
Prepetition Marketing and Sale Process
Since 2018, the Sponsor [Catalyst Group, Inc.] has explored multiple avenues for the sale of some or all of the Debtors’ assets. Specifically, with the assistance of Morgan Stanley, the Company engaged in an extensive marketing process over the last several years. The Company has actively pursued and engaged with potential purchasers regarding multiple potential sale processes. During these negotiations, the Company executed non-disclosure agreements, provided potential purchases access to a data room, and participated in earnest, arms-length sale negotiations. In 2019, the Debtors were also in lengthy due diligence discussions with two potential buyers. In early 2020, the Company neared an agreement with a potential strategic buyer to serve as a stalking horse bidder for 15 of the Debtors’ airport locations. The debtors believed the imminent deal would provide a plan to benefit creditors and allow airports and travelers new service choices. Unfortunately, the unprecedented coronavirus pandemic resulted in government travel restrictions that caused a severe and devastating industry-wide decline in rental demand and, on March 12, 2020, the potential stalking horse bidder informed the Debtors that it would be unable to proceed with the transaction. Consequently, the Debtors, who are already in default on numerous prepetition obligations and have little remaining cash on hand to fund their operations, filed these Chapter 11 Cases to avoid the termination of the Airport Concession Agreements, preserve value, and provide the Company with the ability to attempt to salvage the value of certain of those Concession Agreements by conducting an auction and sale process.
Now, in a final effort to provide value to their stakeholders, the Debtors are seeking this Court’s approval of an expedited auction and sale of the Assets, principally the concession agreements and related documents. The Debtors believe (i) the expedited sale process is the only available alternative to the Debtors other than a chapter 7 liquidation, and (ii) represents a more attractive path forward for the Debtors and offers the potential for a greater return for the Debtors’ stakeholders.
Proposed Key Dates:
- Bid Procedures Hearing: June 9, 2020
- Bid Deadline: June 22, 2020
- Auction, if necessary: June 24, 2020
- Sale Objection Deadline: June 25, 2020
- Sale Hearing: June 26, 2020
About the Debtors
Advantage is the fourth largest car rental company in North America, with 40 airport locations across the United States, in 21 of the top 25 largest airports by passenger traffic.
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