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June 7, 2020 – The Court hearing the Ravn Air Group cases issued an order approving (i) the Debtors’ Disclosure Statement, (ii) proposed Plan solicitation and voting procedures,and (iii) a proposed timetable culminating in a June 25, 2020 Plan confirmation hearing [Docket No. 318].
The Plan confirmation hearing, previously scheduled for July 9th, has been brought forward to June 25th which deals a blow to the Debtors' going concern sales hopes. The Court had shown a willingness (in a bench ruling) to extend the Plan confirmation timetable to dovetail with what appeared to be an energized going concern sales process, but once again DIP lender BNP Paribas has used its whip hand to push the Debtors closer to liquidation. Citing increased costs (a total of $4.0mn, including a $2.2mn receivable from the USPS), BNP Paribas has said that funding the the extra two weeks would render the Plan unconfirmable and breach the existing DIP facility [Docket No. 297].
In a response to that motion, the Debtors' Committee of Unsecured Creditors (the "Committee") [Docket No. 307] shot back: "The Debtors are making significant progress with their going concern sale efforts and conditional approval of the PSP grant under the CARES Act. Despite these developments, the DIP Lenders continue to press on with their liquidation Plan notwithstanding the Court’s ruling extending the confirmation hearing milestone to accommodate the ongoing process. While the bid deadline has been extended by a week to June 24, the DIP Lenders continue to insist that plan confirmation occur the very next day. This unnecessarily shortened timeline not only undermines the logistics of the sale process, but more importantly, allows the DIP Lenders to unilaterally stop the Debtors’ sale efforts, even if qualified bidders have emerged by June 24."
In an interesting turn of events, the Debtors are a step closer to CARES Act funding and a possible escape from the currently anticipated liquidation of their assets, albeit now with a shortened timetable. The revised Disclosure Statement now notes: "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."
It is still the Debtors' hope that CARES Act funding will attract a potential buyer and that they will be able to present an acceptable sales-based transaction to their debtor-in-possession ("DIP") lenders who have otherwise driven a Plan premised on the accelerated liquidation of the Debtors' assets. The Disclosure Statement which continues to go through all the required motions as to a liquidation path, also notes: "The Plan also provides that the Debtors may seek approval of an Asset Sale at Confirmation in the event 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; provided that no Asset Sale shall be considered at the Confirmation Hearing or at Confirmation absent the consent of the DIP Lenders."
The Debtors also filed a liquidation analysis (see below) which unsubtly reminds DIP lenders BNP Paribas that they do not emerge from a liquidation plan in one piece, anticipating a 37-61% recovery for BNP Paribas and also establishing a price to beat for any potential going concern purchaser.
The amended Disclosure Statement [Docket No. 256] provides, “In these Chapter 11 Cases, the Plan contemplates a liquidation of each of the Debtors and is therefore referred to as a 'plan of liquidation.' ….The Plan provides for the creation of a Liquidation Trust, as well as the appointment of a Liquidation Trustee, who will administer and liquidate all remaining property of the Debtors and their Estates, subject to the supervision and oversight of the Liquidation Trust Supervisory Board and the Liquidation Trustee, respectively…The Plan also provides that the Debtors may seek approval of an Asset Sale at Confirmation in the event 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; provided that no Asset Sale shall be considered at the Confirmation Hearing or at Confirmation absent the consent of the DIP Lenders.
Material Terms of the Plan:
- All Allowed Administrative Claims, Allowed Professional Fee Claims, Allowed Priority Tax Claims, Allowed Other Secured Claims, and Allowed Priority Claims will be paid or otherwise satisfied in full as required by the Bankruptcy Code, unless otherwise agreed to by the Holders of such Claims and the Liquidation Trustee.
- Holders of Allowed DIP Claims will receive Class A Liquidation Trust Interests in full satisfaction of their Claims against the Debtors and their estates. Holders of DIP Claims will be deemed to have waived their rights to Distributions from the Creditors’ Fund in respect of their deficiency General Unsecured Claims.
- Holders of Allowed Prepetition Secured Claims will receive Class B Liquidation Trust Interests in full satisfaction of their Claims against the Debtors and their estates. Holders of Prepetition Secured Claims will be deemed to have waived their rights to Distributions from the Creditors’ Fund in respect of their deficiency General Unsecured Claims.
- Holders of Allowed General Unsecured Claims (which will not include any deficiency Claims of Holders of DIP Claims or Holders of Prepetition Secured Claims) will receive a Pro Rata share of the Creditors’ Fund in satisfaction of their Claims against the Debtors and their estates. The Creditors’ Fund will be funded in the amount of $250,000.
- Holders of Allowed Subordinated Claims, if any, shall not be entitled to, and shall not receive or retain any property or interest in property under the Plan on account of such Allowed Subordinated Claims.
- All Equity Interests in the Debtors shall be deemed void, cancelled, and of no further force and effect. On and after the Effective Date, Holders of Equity Interests shall not be entitled to, and shall not receive or retain any property or interest in property under the Plan on account of such Equity Interests.
- In accordance with Section 5.06 of the Plan, subject to the rights of Allowed Other Secured Claims and the reservations set forth in such Section 5.06, the Debtors will be substantively consolidated into Ravn Air Group, Inc.
- Any Intercompany Claims that could be asserted by one Debtor against another Debtor will be extinguished immediately before the Effective Date with no separate recovery on account of any such Claims, and any Intercompany Liens that could be asserted by one Debtor regarding any Estate Assets owned by another Debtor will be deemed released and discharged on the Effective Date; provided, however, that solely with respect to any Secured Claim of a non-debtor as to which the associated Lien would be junior to any Intercompany Lien, so as to retain the relative priority and seniority of such Intercompany Claim and associated Intercompany Lien, the otherwise released Intercompany Claim and associated Intercompany Lien will be preserved for the benefit of, and may be asserted by the Liquidation Trust.
- The Liquidation Trust will be created to (a) sell, liquidate, transfer, or otherwise dispose of the Liquidation Trust Assets, (b) most effectively and efficiently pursue the Liquidation Trust Actions for the collective benefit of all the Liquidation Trust Beneficiaries, and (c) pay Distributions, in accordance with the Plan."
The following is a summary of classes, claims, voting rights and expected recoveries with (defined terms are as defined in the Plan and/or Disclosure Statement):
- Class 1 (“Prepetition Secured Creditor Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0 to 8%. Holders of Claims in Class 1 shall be deemed to have waived the unsecured portion of their Class 1 Claims, if any, and will have no right to recover anything from the Creditors’ Fund with respect to any deficiency Claims.
- Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
- Class 3 (“Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
- Class 4 (“General Unsecured Claims”) is impaired and entitled to vote on the Plan. The estimated recovery is 0.4 to 0.6%. Holder of the Claim shall receive, in full satisfaction, settlement, and release of and in exchange for such Allowed General Unsecured Claim, its Pro Rata share of the Creditors’ Fund. As part of their agreement to fund the Administrative Claims Reserve, the Professional Fees Reserve and the Creditors’ Fund, pursuant to Bankruptcy Rule 9019, Holders of DIP Claims and Class 1 Claims shall be deemed to have waived their rights to Distributions in respect of their deficiency General Unsecured Claims. Allowed General Unsecured Claims will be paid solely from the Creditors’ Fund.
- Class 5 (“Subordinated Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%.
- Class 6 (“Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. The estimated recovery is 0%.
The following documents were attached to the Disclosure Statement
- Exhibit B: Liquidation Analysis
- Voting Deadline: June 19, 2020
- Confirmation Objection Deadline: June 22, 2020
- Confirmation Hearing: June 24, 2020
Liquidation Analysis (see Exhibit B of the Revised Disclosure Statement [Docket No. 256] for notes)
As set forth in the current Liquidation Analysis:
- On or soon after the Effective Date, Cash of $9.65mn-$10.65mn will be used to (a) fund the Administrative Claims Reserve, which will be used to pay Allowed Administrative Claims; (b) fund the Professional Fee Claim Reserve, which will be used to pay all Allowed Professional Fee Claims, (c) pay Allowed Priority Claims and Allowed Priority Tax Claims, and (d) fund the Creditors’ Fund.
- The Debtors estimate an ultimate range of aggregate recoveries from sales of aircraft and related Liquidation Trust Assets in the range of $27.2mn to $41.3mn, net of operating and other expenses through the end of the Liquidation Analysis projection period.
- The Debtors have not ascribed any value to recoveries that may be realized by the Liquidation Trust in respect of any Liquidation Trust Actions, and the Debtors are not aware of any Liquidation Trust Actions that may have material value, but it is possible that the Liquidation Trust Actions may generate significant value.
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