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June 3, 2020 – The Court hearing the Ravn Air Group cases approved bidding procedures relating to a sale of substantially all of the Debtors’ assets (the “Sale”) and has authorized the Debtors to enter into one or more stalking horse agreements [Docket No. 295]. An auction date has not been set (the Debtors are required to provide 24 hours notice to the Court if/when a date is chosen) but a sale hearing is now scheduled for July 9th.
The Debtors continue to pull out all the stops in an effort to find a stalking horse (or perhaps moose) and otherwise generate asset sale momentum. Following the issuance of the bidding procedures order, the Debtors announced the result on their home page and further provided details for prospective bidders as to the auction on another; turning the rather pro forma order into something with the appearance of genuine asset sales traction. The Debtors' CEO Dave Pflieger comments: "This is great news for our creditors, our employees, and our customers who are eager to know the future of Ravn Air Group and how soon it will be before our airline can get back in the air and resume vital air service to 115 rural and urban communities that are currently struggling from non-existent or limited service following the requirement that we park our 72 aircraft.”
Since being grounded by COVID-19 and compelled to file for Chapter 11, these Debtors have refused to give up hope of returning to the air. Social media campaigns, lobbying of any political body that will listen, dogged pursuit of CARES Act funds have all been part of a "never say die" effort. The biggest obstacle to date, however, has been the insistence of its prepetition lender (BNP Paribas, now the DIP lender) that the Debtors get on with a liquidation process that would provide a recovery for that lender. When CARES Act funds did not materialize out of the chaos that surrounded the launch of that program, the Debtors had no place to turn for DIP financing except to BNP Paribas who provided just enough funding to avoid the need for an immediate liquidation.
The agreed DIP facility included an aggressive timetable that the Debtors (and others, eg the Debtors' Creditors' Committee, see below) argued largely shut the door on any possible going concern sale of Alaska's largest regional airline and by all accounts a critically important service for many Alaskan communities. As such, the Debtors held their noses and filed the liquidating Plan and Disclosure Statement required by to be filed within 20 days of their Chapter 11 filing; a Plan which memorialized marching orders from the DIP lender and which has to be confirmed by June 22nd. Game over? Not for this aspiring phoenix. These Debtors have now concocted a possible escape, combining the possibility of CARES Act funds and a last minute asset sale to steal a famous victory by June 22nd.
The Debtors' May 14th bidding procedures motion [Docket No. 197] reminds the Court (and the DIP lender) that under the terms of the Plan, if they can come up with an asset sale that yields "a higher or better return to the Estates than a sale by the Liquidation Trust, they may seek approval of an Asset Sale at Confirmation." The Debtors then advise the Court that ongoing discussions with the U.S. Treasury Department leave them optimistic that they will have access to $35.0mn of CARES Act funds, on the condition that they have a going concern buyer (certainty as to CARES Act funds certainly making the Debtors a more attractive acquisition). As to potential buyers, the Debtors note: "the Debtors have engaged with a number of parties that have expressed interest in purchasing all or some of the Debtors’ Assets…."
As it turns out, also on March 14th the Debtors received some positive news on the CARES Act front (which in turn makes the emergence of a stalking horse more likely) with their Disclosure Statement providing: "On May 14, 2020, the United States Department of Treasury informed the Debtors that it was prepared to move forward with their Payroll Support Program applications, subject to certain requirements, including that the funds from the PSP grants be used exclusively for the payment of wages, salaries, and benefits to employees, and that the Debtors maintain the level of scheduled air transportation service served by the Debtors before March 1, 2020. The Debtors are also required to provide a plan of reorganization that would demonstrates the Debtors’ ability to satisfy the requirements under the PSP agreement."
The bidding procedures motion states, “On April 3, 2020, the Debtors submitted applications for grants under the CARES Act. The Debtors also filed applications for up to $75 million in loans under the CARES Act later in the month (together with the grant applications, the “CARES Applications”)…
[Further to interim and final debtor-in-possession (“DIP”) orders] the Debtors must undertake an accelerated timetable for resolution of these Chapter 11 Cases. Specifically, the Debtors have agreed as a condition of borrowing under the DIP Facility (as defined in the DIP Orders) to meet certain bankruptcy case milestones (‘Plan Milestones’) set forth in the DIP Orders. These Plan Milestones, calculated as days from the Petition Date, are: (i) 20 days (April 27) to file an Acceptable Plan (as defined in the DIP Orders) and a disclosure statement for the Acceptable Plan; (ii) 48 days (May26), subject to the Court’s availability, to obtain court approval of the Disclosure Statement; and (iii) 76 days (June 22), subject to the Court’s availability, to obtain confirmation of the Acceptable Plan.
Accordingly, on April 27, 2020, the Debtors filed a proposed Chapter 11 Plan of Liquidation…and a related proposed Disclosure Statement …The Plan contemplates, in accordance with the requirements for an Acceptable Plan under the DIP Facility, for the creation and funding of a Liquidation Trust to administer and liquidate all remaining property of the Debtors. The Plan, however, also provides as follows: ‘To the extent that the Debtors conclude that an Asset Sale at Confirmation will yield a higher or better return to the Estates than a sale by the Liquidation Trust, they may seek approval of an Asset Sale at Confirmation; provided that no Asset Sale shall be considered at the Confirmation Hearing or at Confirmation without adequate notice prior to the Confirmation Hearing and absent the consent of the DIP Lenders.’
As of the filing of this Motion, the United States Department of Treasury has not approved the Debtors’ CARES Applications. However, the Debtors have had continuing discussions with representatives of and advisors to the Department of Treasury and anticipate that, in the event a purchaser emerges that is willing and able to purchase the Debtors’ assets and business as a going concern, up to $30 million of CARES Act funding maybe available as a Payroll Support Program Assistance grant, as well as $5 million in the form of a loan under the CARES Act, subject to certain requirements and conditions for such funding.
Since the Petition Date, the Debtors have engaged with a number of parties that have expressed interest in purchasing all or some of the Debtors’ Assets. As of the filing of this Motion, these discussions are ongoing but have not yielded a definitive agreement. Nevertheless, in order to ensure that the Debtors, in consultation with the Creditors Committee and the DIP Lenders, have the opportunity to explore these offers and any others that may emerge on a timeline that is consistent with the Plan Milestones, the Debtors developed the Bidding Procedures that are the subject of this Motion.
Bid Protections: In the event that the Debtors enter into one or more Stalking Horse Agreements, the Debtors may seek approval at the Sale Hearing of a break-up fee and expense reimbursement for any Stalking Horse Agreement, with respect to which the prospective purchaser is not an insider of the Debtors (a “Non-Insider Stalking Horse Agreement”), of no more than 3% of the Purchase Price of such Non-Insider Stalking Horse Agreement (together, the “Bid Protections”).
- Bid Deadline: June 24, 2020
- Objection Deadline: June 29, 2020
- Sale Hearing: July 9, 2020
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