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Republic to sponsor Frontier?s Chapter 11 exit and to be new owner

23rd June 2009 - 12:05 GMT | by The Shephard News Team


Frontier Airlines Holdings has entered into an investment agreement with Republic Airways Holdings by which Republic will serve as equity sponsor for Frontier's plan of reorganisation and purchase 100% of the equity in the reorganised company for $108.75 million. The plan sponsorship agreement is subject to bankruptcy court approval and various conditions.

If the plan of reorganisation is approved and implemented as proposed, upon its emergence from Chapter 11, Frontier Airlines Holdings would become a wholly-owned subsidiary of Republic, itself a holding company that owns Chautauqua Airlines, Republic Airlines and Shuttle America. Frontier Airlines and Lynx Aviation would maintain their current names and continue to operate as usual.

“Thanks to the hard work of its employees, Frontier has made tremendous strides during its restructuring process, recently posting its sixth straight monthly operating profit despite challenging economic conditions,” remarked Bryan Bedford, chairman, president and CEO of Republic Airways. “Adding Frontier to the Republic portfolio of operating companies is an opportunity for both companies to build on recent successes and strengthen the Republic organisation for the benefit of all stakeholders.”

Frontier president and CEO, Sean Menke, added, “This agreement represents a major milestone in our ongoing efforts to position Frontier to emerge from bankruptcy as a competitive, sustainable airline. Through our reorganisation process, we have transformed Frontier Airlines and Lynx Aviation into two of the most efficient operating carriers in North America. Additionally, we diversified our revenue generation through the introduction of ancillary charges and our branded 'AirFairs' product. The culmination of all this extraordinary work is that, even in the worst economic environment in the last 50 years, the company has posted an operating profit for each of the past six months and a net profit for the past two quarters.”

Frontier has now filed its proposed plan of reorganisation and a related disclosure statement with the US Bankruptcy Court for the Southern District of New York. Frontier also filed a motion to approve the investment agreement with Republic, subject to higher and better proposals under a court-supervised auction. Frontier will seek court approval of the investment agreement and proposed auction procedures at a hearing scheduled for 13 July 2009. Frontier currently expects to conclude the auction process and emerge from Chapter 11 by autumn 2009.

In March 2009, Frontier received a firm commitment for $40 million in post-petition debtor-in-possession (DIP) financing from Republic Airways Holdings to support its additional working capital needs and refinance its expiring DIP loan, increasing the available financing and preserving Frontier's financial stability. As a condition to the loan, Frontier agreed to allow Republic's damage claim in the amount of $150 million arising out of Frontier's rejection of its airline services agreement with Republic.

The proposed plan of reorganisation provides for general unsecured creditors to receive $28.75 million in cash. An additional $40 million of the sale proceeds would be applied as repayment of the outstanding DIP loan. If the plan is implemented as proposed, the company's current equity would be extinguished and holders of that equity would not receive any recovery.

The Shephard News Team


The Shephard News Team

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