Grupo Aeroméxico, S.A.B. de C.V. – Court Approves Exclusivity Extensions as Debtors Begin Solicitation Process for Apollo/Delta-Backed Plan Over Objections of Creditors’ Committee

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December 13, 2021 – The Court hearing the Grupo Aeroméxico, S.A.B. de C.V. cases has extended the periods during which the Debtors have an exclusive right to file a Plan and solicit acceptances thereof, through and including December 30, 2021 and February 28, 2022, respectively [Docket No. 2307]. Absent the relief, the Plan filing and solicitation periods were scheduled to expire on December 9, 2021 and December 8, 2021, respectively.

The Debtors requesting motion notes that the Debtors are "in the homestretch" and indeed since the filing of that motion the Debtors have had their Disclosure Statement approved (December 10th) and have commenced their solicitation process.

The homestretch is not yet, however, a trot to the winner's circle; with freshly printed solicitation documents obliged to disclose the still very emphatic opposition of the Debtors' Official Committee of Unsecured Creditors (the "Committee") to the Plan as proposed; with that Committee arguing that the "inherently flawed" Plan "does not reflect the fair market value of the Debtors due to the Debtors’ flawed exit financing process (which, among other issues, baselessly favors certain insiders whose support is not necessary to confirm a chapter 11 plan). Moreover, the Committee believes that the Plan is plagued with confirmation issues including, without limitation, that it (a) fails to meet the strict ‘heightened scrutiny’ and ‘entire fairness’ standard due to the Debtors’ transactions with insiders and (b) violates the absolute priority rule by making distributions to those insiders for inadequate or no consideration."

Nonetheless, the Debtors, adamant that a "viable alternative plan for the Debtors to successfully emerge from chapter 11 at this time simply does not exist," are pressing ahead with (i) a Plan supported by DIP lender Apollo, strategic partner Delta and a slate of Mexican investors (ie, the insiders drawing the Committee's wrath) and (ii) a January 18th Plan confirmation hearing.

The extension motion [Docket No. 2193] explains, “The Debtors commenced these Chapter 11 Cases faced with unprecedented challenges caused by the COVID-19 pandemic and principally sought to (a) obtain financing critical to the Company’s ability to fund operations and maximize the value of their estates; (b) rationalize their workforce and negotiate key amendments to their collective bargaining agreements; (c) optimize their fleet and obtain favorable terms for new and amended agreements for aircraft and related equipment; and (d) successfully restructure through the confirmation of a plan of reorganization and emerge from chapter 11 well-positioned for long-term success. The Debtors have largely achieved the first three of these goals, and the Debtors submit that their ultimate goal, confirming a Plan and emerging from chapter 11, is within reach.

These Chapter 11 Cases are in the homestretch. Allowing the Exclusive Periods to lapse could needlessly hinder the Debtors’ ability to successfully reorganize to the detriment of their estates, their creditors and all other stakeholders in these Chapter 11 Cases. The Debtors and the various constituencies in these Chapter 11 Cases have invested an incredible amount of time and effort — at a substantial cost to the Debtors’ estates — negotiating a consensual, value-maximizing exit from bankruptcy, as memorialized in the Debtors’ Plan. In fact, the Debtors’ Plan is based upon a combination of proposals received from various constituencies.

Loss of the Debtors’ exclusive right to file and solicit votes on a chapter 11 plan would needlessly risk squandering the time and resources expended to date, derailing months-long negotiations and materially delaying the Debtors’ emergence from chapter 11. Conversely, granting this Motion and extending the Exclusive Periods to their statutory maximum (as is done in nearly all bankruptcy cases of this size and complexity) will permit the Debtors to conclude their reorganization well-positioned to succeed as Mexico’s flagship carrier and a leading carrier in Latin America, without the costly and time-consuming distraction of a competing plan on file, to the benefit of all parties in interest.

The hearing on the Debtors’ Disclosure Statement Motion is currently scheduled for December 6, 2021 [order issued on December 10th], and contemplates that a confirmation hearing will be held on January 17, 2022 [now January 18th]. The relief requested herein will permit the Debtors to seek approval of the Disclosure Statement and confirmation of the Plan on the timeline currently contemplated without the unnecessary contentious confirmation process and unavoidable delay that a competing plan would produce.”


On November 11th (U.S. press release dated the 12th), Aeroméxico announced that it had: "received a joint proposal (the 'Alliance Proposal') from its lenders under Tranche 2 of our DIP financing facility [i.e., Apollo] and from certain existing creditors and new money investors with whom the Company was prepared to enter into commitment papers upon court approval thereof. The Alliance Proposal has the support of our strategic partner Delta Air Lines and provides an implementable solution, through a solid group of long-term Mexican investors, to comply with foreign ownership requirements.  The Board of Directors of the Company has approved, among other matters, instructing the Company's restructuring advisors to prepare, in coordination with advisors for the key stakeholders, a revised version of the Chapter 11 Joint Plan of Reorganization (the 'Plan') and the disclosure statement with respect to the Plan (the 'Disclosure Statement'), including any supplements and exhibits related thereto, reflecting the terms of the Alliance Proposal."

As proposed, the Plan would leave the "Equity Financing Commitment Parties," Apollo, Delta and the Mexican Investors with 26.9%, 22.38%, 20.0% and 4.1%, respectively, of the emerged Debtors new common stock. The Equity Financing Commitment Parties (ie Delta, the BSPO  Investors, the Noteholder Investors, the Claimholder Investors, the Mexican Investors and any parties to the Debtors' "Equity Financing Commitment Letter") are in line for a 15% "Equity Commitment Premium" based on their contributions to the $720.0mn of equity financing. Apollo is also in line for "(i) $150 million in cash and (ii) accrued interest under the DIP Credit Agreement at the Applicable Margin (as defined in the DP Credit Agreement) of 14.5% on the outstanding obligations to Apollo under the Tranche 2 DIP Facility commencing December 31, 2021 through the Effective Date, payable in Cash."

The Debtors' aspirations for the amended Plan (and its proposed exit financing) are somewhat complicated by the November 26th filing [Docket No. 2178] of an objection to that exit financing by an ad hoc group of OpCo creditors (the “Ad Hoc Group,” comprised of Invictus Global Management, LLC, Corvid Peak Capital Management LLC, Hain Capital Group, LLC and Livello Capital Management LP and holding in aggregate an estimated $131.0mn of debt [Docket No. 2179]) which argues that its own alternative exit financing proposal "provides a consensual path towards exiting chapter 11 while at the same time distributing value fairly across the capital structure, including to fulcrum general unsecured claims holders ('GUC Holders') and increasing plan value by $450 million…[and] leaves unaltered the negotiated economic rights of certain key parties (Delta, Apollo, and significant Mexican shareholders) and provides markedly improved recoveries for the fulcrum class of GUC Holders — i.e., increasing the recovery range from 14-14.5% to up to 29-31%." The objection attaches a comparison chart and the November 21st alternative exit term sheet that the Ad Hoc Group shared, without result, with the Debtors.

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