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:​

 

[lowecur]

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.

Let me know how that works? Giving them a commitment of $75M for DIP + $100M for 79% of the stock in the new private entity. That would be like shooting themselves in the foot.

imp:​

 

[Poahi]

... The $75 million commitment ...is a significant vote of confidence in ... business plan," "Industry data supports our conclusion that when given a choice, ... prefer Frontier over the competitive options. ... Although Frontier has been buffeted by ... certain other issues, "

Certain other issues? I guess the question is - will the $75 Million be enough to fund a turf war with WN? This is the classic David v. Goliath scenario. Hold on and good luck because WN is about to start buffeting a whole lot more....

 

[airlinepilot]

$75 Mil is a drop in the bucket these days. You have to wonder if the new private company is not going to sell the part(s) and save the rest for Spirit. 75M is very cheap for ownership and I wonder if you won't see other bidders. Sorta like the deal Air Tran tried to do with ATA. It's going to be interesting.

 

[eaglesview]

It is sad how many of you guys actually sound as though you are hoping fronteir goes away. That is pathetic. Hopefully all goes well and the tail stays. PS I am not a fronteir employee.

 

[Poahi]

It is sad how many of you guys actually sound as though you are hoping fronteir goes away. That is pathetic. Hopefully all goes well and the tail stays. PS I am not a fronteir employee.

You might direct your comment to the SWA Board of Directors....

 

[eaglesview]

You might direct you comment to the SWA Board of Directors....

Last I checked they didn't post here.

 

[Larcifer]

It is sad how many of you guys actually sound as though you are hoping fronteir goes away. That is pathetic. Hopefully all goes well and the tail stays. PS I am not a fronteir employee.

Unless you haven't figured it out yet we cannot all stay. Somebody has to go away in order for the rest to survive. Dog eat dog.

P.S. I am a F9 employee.

 

[hockeypilot44]

If Frontier makes it, it will be after more voluntary paycuts. Management will come back for more. They always do. Frontier will not be the same Frontier.

 

[TAWS]

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...........

Where on the balance sheet does it say how much the revenue was from the Republic operation?

I only see operating expenses. Has the revenue side of the equation already been factored in?

 

[ClassG]

I have a ton of confidence writing this:

I know MANY who fly for Frontier. They would have given their first born to work for Frontier, and they would give their first born to save that company. Because they respect themselves, each other as a group, and the PEOPLE they work with. Once it's saved though, you can bet they'll DEMAND everything back.

Not exactly your airline "regulars" over there. They're a little dif'rent.....In a good way.

Keep fighting F9. Things are looking UP!

(As always, someone will have to say "No self-respecting pilot group would allow themselves to be talked into a pay cut." Here's one that may have resulted in real "goodwill" - at least enough to attract a serious investor.)

ClassG

 

[hockeypilot44]

I have a ton of confidence writing this:

I know MANY who fly for Frontier. They would have given their first born to work for Frontier, and they would give their first born to save that company. Because they respect themselves, each other as a group, and the PEOPLE they work with. Once it's saved though, you can bet they'll DEMAND everything back.

Not exactly your airline "regulars" over there. They're a little dif'rent.....In a good way.

Keep fighting F9. Things are looking UP!

(As always, someone will have to say "No self-respecting pilot group would allow themselves to be talked into a pay cut." Here's one that may have resulted in real "goodwill" - at least enough to attract a serious investor.)

ClassG

BULLSH!T!!!! Paycuts have nothing to do with getting DIP financing. If the company makes it with the paycuts, then it would have made it without the paycuts. Paycuts do not save airlines. Frontier will come back to the pilots for more paycuts before it exits bankruptcy and get it. When this is all said and done, Frontier will not be worth working at if it's still in business.

 

[Green]

that's why this profession sucks. Too many pilots will willingly hand over their wallets to management at the same time the VP's are awarding themselves retention bonuses and stock options. Labor paycuts do not save airlines. But if it makes you feel better to make less money then go for it.

"....and they would give their first born to save that company."

You are kidding I hope????

 

[Cardinal]

Clarification: The most Frontier can get out of the present deal is 100 million. The 75 mil DIP financing will become part of the ownership stake. Upon BK exit Perseus coughs up the extra 25 mil for the 100 mil total. We are not, repeat not getting 175 mil, as some concluded from the press release, which should have been worded more clearly. - Reference Sean's presentation to the company 7/25/08.

 

[F/O]

I never quite understood this. Let's say these investors bought the whole wad for $100 mil. That's about what 3 or 4 airbuses are worth, right? So sell off 4 a/c, recoup your investment, then sell off all the rest and make a few hundred mil profit.

Is this view too simplistic?

 

[yourhairsonfire]

Clarification: The most Frontier can get out of the present deal is 100 million. The 75 mil DIP financing will become part of the ownership stake. Upon BK exit Perseus coughs up the extra 25 mil for the 100 mil total. We are not, repeat not getting 175 mil, as some concluded from the press release, which should have been worded more clearly. - Reference Sean's presentation to the company 7/25/08.

Can someone clarify this as well:

"allowing Perseus to purchase 79.9% of the equity in the reorganized company"...what exactly does this mean?

Stock and equity are not the same thing. Either way...Perseus (GoFlipGo) will have the keys to the house...

 

[Cardinal]

So sell off 4 a/c, recoup your investment, then sell off all the rest and make a few hundred mil profit.

That's a valid concern.

 

[radarlove]

Stock and equity are not the same thing. Either way...Perseus (GoFlipGo) will have the keys to the house...

Yes they are. Once the company is reorganized, the current shareholders get a bag of dirt, the current bondholders get stock in the new entity and Perseus gets a whole bunch of stock and then puts in some more money for even more.

Perseus is one very, very sharp firm. They're going to get theirs coming or going, it makes zero difference if the company gets liquidated or goes public again. Well, that's not true, they make more money if it reorganizes and goes public, but if that doesn't work, these guys aren't going to lose any money.

DIP agreements are a true deal with the devil. You need to make it, but it's like in the Goodfellas movie "F-you. Pay me."

These guys are very sharp, but Frontier better start making moolah and making moolah fast, or they're going to say, "F-you. Pay me."

I bet their $75 million is covered by $150 million in hard assets as collateral. In bankruptcy court, the new guy (DIP) gets priority even over the senior bondholders.

"F-you. Pay me."

 

[Cornelius]

That's funnier than crap mang. That is pretty much what will be going here at F9 if management is in over their heads.

 

[StaySeated]

I never quite understood this. Let's say these investors bought the whole wad for $100 mil. That's about what 3 or 4 airbuses are worth, right? So sell off 4 a/c, recoup your investment, then sell off all the rest and make a few hundred mil profit.

Is this view too simplistic?

If the aircraft were owned outright, then this would be true, but F9 does not own anything outright. They lease 48 aircraft, no equity there. The remaining aircraft have at least two lien holders, with some being superseded in BK court. F9 has encumbered every piece of equity they have, so if we liquidate after the perseus deal, perseus will get whatever fees they attached to the deal in cash and whatever they can get selling the remaining "owned" pieces. If this deal goes through, and if we emerge from BK, it will be very interesting to see what perseus decides to do with its new little toy airline. Things just got real interesting, we should all strap in and enjoy the ride and see what happens. Getting a few more months of liquidity sure beats shutting the doors next month.

 

[USAFftrplt]

Whats up in Pittsburgh??

I flew in to Pittsburgh today and there were about 7 or 8 airbuses parked with all of the covers on them during the middle of the day and not a sole was moving around the planes??????