Frontier DIP congrats

[FR8dognit]

Frontier Airlines Receives Commitment for $75 Million in DIP Financing From Affiliate of Perseus LLC
Friday July 25, 11:31 am ET
Perseus Also Agrees To Serve As Equity Sponsor for Frontier's Emergence from Bankruptcy DENVER, July 25 /PRNewswire/ -- Frontier Airlines Holdings, Inc. today announced it has received a $75 million commitment in post-petition debtor-in-possession (DIP) financing from Perseus LLC, a private investment firm based in Washington, D.C. with offices in Evergreen, Colorado, New York and Munich. Perseus has also agreed to serve as equity sponsor for Frontier's plan of reorganization, allowing Perseus to purchase 79.9% of the equity in the reorganized company for $100 million. The DIP facility and plan sponsorship are subject to bankruptcy court approval and to various conditions.[SIZE=-2]ADVERTISEMENT[/SIZE]

"Today's announcement is a major boost to Frontier and builds momentum toward its emergence from bankruptcy as a viable enterprise. The $75 million commitment in DIP financing from Perseus is a significant vote of confidence in the employees of Frontier, our product and business plan," said Sean Menke, Frontier President and Chief Executive Officer. "Despite the current challenges facing the airline industry, these transactions help point the way towards Frontier's emergence from bankruptcy as a competitive, sustainable airline."

"We are enthusiastic about the opportunity to invest in the future of Frontier," said Brian Leitch, Senior Managing Director of Perseus. "We believe that Frontier has the highest-quality affordable coach product in the domestic airline industry. We are impressed by Frontier's excellent employees and friendly customer service, as well as the numerous product characteristics that distinguish Frontier from its competitors. Industry data supports our conclusion that when given a choice, the majority of coach travelers prefer Frontier over the competitive options. The airline industry is in a state of transition and some degree of turmoil. Although Frontier has been buffeted by recent fuel price increases and certain other issues, we believe that Frontier has proven that it deserves a chance to succeed in this challenging market, and we are proud to help it do so."
Leitch continued, "We have named our acquisition affiliate Go Flip Go, L.L.C, as a symbol of our desire to encourage and preserve Frontier's unique cultural attributes. Of course, we also want to support Larry, Hector, Grizwald, Jack, Sally, the penguins and all the other Frontier animals."

Frontier filed a motion today with the U.S. Bankruptcy Court for the Southern District of New York. Upon court approval, Perseus will provide funding under the proposed DIP credit facility in two installments to support the company's working capital needs.

The proposed DIP funding, coupled with Frontier's negotiations with partners to improve liquidity, reduce expenses, and preserve cash, is expected to provide sufficient working capital for the Company's operations. The Company continues to work with its partners and employees to obtain additional liquidity, reduce expenses and enhance revenues.
"We are grateful that many of our key vendors and business partners, as well as all of our employees, have stepped up and made financial sacrifices to help provide Frontier with a lot of staying power," Menke said. "Through a variety of transactions and business initiatives, we have improved our liquidity over a very short period of time. All of this support reaffirms the fundamental business changes we have been making since the beginning of the year. We continue to adjust capacity and realign our route network to leverage our brand strengths and market awareness during a period of severe industry turmoil."

 

[Hutchman]

Does anyone now if $75 million is enough to get out of BK? It doesn't sound like a whole lot of cash given the monthly cash burn rates.

 

[StopNTSing]

Well done, guys! :beer:

 

[greenbayfan]

Well let's see, they are losing $22m a month, how long do you think they will last? $75m is an extra 3.5 months....

 

[greenbayfan]

(In $U.S. 000’s)​

​

​

Month
Ended
April 10,
2008 to
May 31,
2008
April 30,
2008
Filing to
Date​

Revenues:
Passenger..................................................................................... $ 116,350 $ 66,833 $ 183,183
Cargo........................................................................................... 628 322 950
Other............................................................................................ 3,106 1,914 5,020
Total revenues.......................................................................... 120,084 69,069 189,153
Operating expenses:
Flight operations.......................................................................... 16,216 10,623 26,839
Aircraft fuel................................................................................. 62,096 27,592 89,688
Aircraft lease ............................................................................... 9,817 6,563 16,380
Aircraft and traffic servicing ....................................................... 14,748 10,804 25,552
Maintenance ................................................................................ 10,633 4,632 15,265
Promotion and sales .................................................................... 13,101 6,415 19,516
General and administrative.......................................................... 4,724 3,280 8,004
Operating expenses – regional partner ........................................ 10,698 8,726 19,424
Loss (gain) on sales of assets, net................................................ (9,216) 6 (9,210)
Depreciation ................................................................................ 3,735 2,714 6,449
Total operating expenses ......................................................... 136,552 81,355 217,907
Operating loss ................................................................................. (16,468) (12,286) (28,754)
Nonoperating income (expense):
Interest income ............................................................................ 522 262 784
Interest expense (contractual interest expense was $3,353
from April 10,2008 to May 31, 2008) (Note 2)........................... (2,962)
(1,907) (4,869)
Loss from early extinguishment of debt...................................... (239) - (239)
Other, net..................................................................................... (130) 2 (128)
Total nonoperating expenses, net (2,809) (1,643) (4,452)
Loss before reorganization items and income taxes........................ (19,277) (13,929) (33,206)
Reorganization items (Note 4) .................................................... 2,689 2,531 5,220
Income taxes................................................................................ - - -
Net loss ........................................................................................... $ (21,966) $ (16,460) $ (38,426)​

 

[Cornelius]

Our moat is getting bigger around A-Concourse.

 

[Newf Dog]

We will not continue to lose $22 million per month. If that were the case nobody would give us DIP and expect anything in return. You will notice that over $10 million of the loss is from Republic which is now out of the equation.

Off the top of my head we have about $110 mil restricted cash another $100 mil or so unrestricted. Add to that $75 mil DIP plus another $100 mil equity purchase upon BK emergence. ALSO not included is the revenue gained from the sale of the remaining 9 of the original 11 airplanes offered for sale. Maybe another $100 mil or so but I have no idea on that one.

Cutting capacity by 17% will obviously hurt revenue but a closer look at the numbers going forward reveals a significant reduction in expenses, and therefore losses, and right now it's all about stopping the bleeding. Operating losses will be significantly lower going forward especially in the area of fuel expense (going into the fall). That won't show up in the next few months numbers.

Our CASM x-fuel should be about 5.5 cents. That's pretty low and much lower than SWA whose CASM with and without fuel is increasing dramatically. It would appear that our goal is to hang tough and stem the bleeding. We have numerous revenue enhancement initiatives beginning in the fall. We can hold our own against SWA with their present Denver growth strategy. If they begin to raise fares that's bonus for us.

As always the wildcard is fuel. If it comes down we're golden. If not...........

 

[greenbayfan]

I guess time will tell Newf, but even without the Republic, (which your are losing revenue from as well so you can't just lop $10m/mo. in losses off), Frontier has an operating loss of $15m a month for May (accounting for the sale of assets). Most other LCC's don't lose that in a quarter. Now you have SWA cutting your throat in Denver (which is no coincidense that they just showed up there), and you have a serious problem for long term (and possibly short term) survival. The initial post made it sound as if this financing would save the airline, the problem is that the DIP financing guys will make a profit when Frontier gets shut down.

 

[Newf Dog]

"I guess time will tell Newf..."


That pretty much sums it up.

 

[lowecur]

Good Going!

If I understand this correctly, 79% of stock means the company will be taken private ala Spirit. That's great, since mgt will no longer have to focus on the public relations to keep a public companies shareholders happy. CEO can now focus on running the co.

This just stuck a foot in the door at DIA as WN tried to slam it shut. 2009 will be interesting as fuel unwinds.

They are also talking to creditors (including Airbus)about putting up the other 20%, which tranlates to $20M. Not much compared what can be lost if they shut down.

imp:​