Aeromexico Reaches $40 Million Deal With Creditors in Bankruptcy Exit


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Jan 27 (Reuters) – Grupo Aeromexico has reached a $40 million settlement with a group of unsecured creditors to withdraw their objection to the airline’s bankruptcy restructuring plan, Aeromexico’s lead lawyer said on Thursday .

The decision is the first step in what is expected to be a multi-day Chapter 11 bankruptcy hearing in New York. Despite the agreement with the unsecured creditors’ committee, objections remain from an ad hoc group of junior creditors, including Invictus Global Management.

As part of the agreement, Aeromexico (AEROMEX.MX) has offered unsecured creditors potential distributions from a four-year, $40 million “contingent right to value” note, which would distribute distributions in species as long as Aeromexico exceeds its targets, said Timothy Gaulich. of Davis Polk & Wardwell said.

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“This is really great news,” US judge Shelley Chapman said after the deal was announced.

Aeromexico, which filed for Chapter 11 bankruptcy in New York in June 2020, began arguing with Chapman on Thursday for his proposed restructuring, which would inject new capital into the company and make Apollo Global Management (APO.N), a frequent partner. investor in companies in difficulty, the main shareholder.

Although the airline has lined up the support it needs from its multiple creditor groups, some still say the plan should not be approved unless junior creditors, some of whom only see pennies on the dollar, receive better recoveries.

Chapman, who did not comment on the plan Thursday, has set aside several days for the hearing, which is expected to resume Friday. If it ultimately approves the deal, Aeromexico – one of Latin America’s three major airlines that filed for bankruptcy during the pandemic – could emerge from bankruptcy.

The plan, according to the airline, would reduce its debt by $1 billion and save around 13,000 jobs. But some junior creditors argue it is too beneficial for existing shareholders, including Delta Air Lines Inc (DAL.N) and four board members, at their expense.

Delta and the four Mexican individuals are in line to retain some equity in the reorganized company. Delta, which is expected to own about 20% of the company after the restructuring, said approval of the plan was key to maintaining its long-term relationship with Aeromexico.

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Reporting by Maria Chutchian; Editing by Bill Berkrot, Christian Plumb and Aurora Ellis

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