Pinnacle Airlines Seeks $52M In Additional Funding To Emerge From Chapter 11

by Tara Arick on January 8, 2013 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

Bankrupt Pinnacle Airlines Corp. on Jan. 2 moved in the U.S. Bankruptcy Court for the Southern District of New York for approval of an additional $ 52 million in post-petition financing, which the airline says will allow it to emerge from Chapter 11 bankruptcy (In Re: Pinnacle Airlines Corp., No. 12-11343, Chapter 11, S.D. N.Y. Bkcy.).  Pinnacle Airlines filed for Chapter 11 on April 1.

DIP Financing

The airline seeks approval of additional post-petition financing, also called debtor-in-possession (DIP) financing, in the amount of $ 52 million. Of that amount, $ 22 million would be used solely to make payments on what is called a bridge agreement, as well as tax payments.

The other $ 30 million of the requested DIP funding would provide working capital for Pinnacle, as well as money for other general corporate purposes.

Pinnacle says it has reached a comprehensive agreement with Delta Airlines, the Air Line Pilots Association (ALPA) and the Official Creditors Committee that provides the airline with the ability to emerge from Chapter 11.

Additional Liquidity

Specifically, the comprehensive agreement consists of $ 30 million of additional liquidity necessary to continue operating Pinnacle’s business through emergence from Chapter 11; amended operating agreements that will form the basis of a viable long-term business plan; a bridge agreement providing certain benefits to Pinnacle’s pilots that facilitated a consensual ALPA agreement; up to $ 22 million of additional loans to make what are called longevity transition payments due to the pilots who are eligible based on years worked; and sufficient exit financing to repay the increased amount of the additional financing.

Under the comprehensive agreement, Delta and Pinnacle have agreed to increase the number of aircraft operating under the CRJ-900 agreement from 41 to 81 and wind down Pinnacle’s flying of 140 aircraft under the CRJ-200 agreement.

Profitability

The airline says its expects its operations to be profitable by 2014.

Moreover, the additional 40 CRJ-900 aircraft will shift the composition of Pinnacle’s fleet toward current trends in the regional jet industry favoring larger dual-class aircraft, Pinnacle says.

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