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Friday, December 9, 2022

Aeromexico Creditor Objected Proposed Restructuring Plan

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Invictus Global Management, an Aeromexico creditor, has filed a formal objection to the airline’s proposed restructuring plan to emerge from Chapter 11 bankruptcy proceedings.

Invictus Global Management stated in a public statement dated December 20, 2021 that Aeromexico’s proposed restructuring is unreasonable since it unfairly divides shares and repays debt.

According to the letter, the airline’s two largest shareholders, Delta Air Lines and Apollo Global Management must resolve conflicts of interest that are jeopardizing Aeromexico’s restructuring.

“It is clear that daylight needs to shine on the actions and decisions that could position you to make hundreds of millions of dollars at the expense of other stakeholders, including the many who stand to be economically crushed under the plan preferred by Delta and Apollo,” Cindy Chen Delano, Co-Founder and Partner at Invictus Global Management, wrote in a letter.

A letter signed by three smaller Aeromexico creditors and the Aeromexico financial report for Q3 reveal that Delta obtained the option to purchase $185 million (plus certain interest and fees) of Apollo’s Tranche 2 debtor-in-possession (DIP) obligations in November 2020, more than seven months before public disclosure.

As a result, if the restructuring proposal is approved, Delta Air Lines’ stake in Aeromexico will be diluted to 20%, while Apollo, the airline’s creditor, will own 22%.

Other creditors, including Corvid Peak Capital Management and Hain Capital Group, wrote a public letter on December 9, 2021, stating “that this bankruptcy process is marred by conflicts of interest and opacity that is not in the best interest of the creditors and will thus devolve into protracted litigation.”

As the global epidemic halted air travel, Aeromexico filed for Chapter 11 bankruptcy protection in the United States in June 2020. The business announced a $5.4 billion reorganization plan in October 2021.

Then, in December 2021, the company filed a revised version of its reorganization plan, which included plans to designate its creditors “exceptional recoveries and retain substantial equity in the reorganized company”.

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