Bankruptcy costs

[Noam]

I'm not too knowledgeable in bankruptcy law, so hopefully someone who is more intelligent than I will be willing to help me out with this one.

Let's say you have an airline that has approximately 80 narrow body jets. They have only about 100-150 million in unrestricted cash and approximately 600 million in debt. Although costs are under control, revenue is the lowest in the industry. I'm talking about ATA if you haven't figured it out already.

I was told by someone that if ATA did happen to file bankruptcy (and I'm not saying that they are going to here) they would go to CH 7 because they don't have enough cash to go through CH 11. If this is true, can someone elaborate a bit?

I don't know what to think. I didn't know CH 11 cost money. On the other hand, very few airlines (especially majors) have immediately gone to CH 7 after a bankruptcy filing.

Thanks,

Noam-g-funk

 

[mt2]

cash vs. a good plan

Noam --

Been Ch 11 qualified twice now. Don't particularly like it but I am somewhat experienced. Here's my take. Cash is king, even in bankruptcy. ATA must have enough of it to pay any "secured" creditors. They must also have some to pay for the bankruptcy lawyers that inevitably come with a Ch. 11 filing. More importantly though will be ATA's ability to convince the creditors (usually a committee) that they will be more likely to recoup their money if the Company moves forward, restructured, with a solid plan. While Ch 7 is an option any time someone files for bankruptcy, it is more likely that a company would file Ch 11 first. Based on my previous trips into Ch 11, I feel this would be ATA's route of choice. I do feel, however, that this would be a very last resort --especially when you consider JGM's ownership position. There are several businesses ( C8, Key Tours, etc.)within ATA Holdings the Company could sell to generate some cash prior to that point. I have heard what you heard and took it with a grain of salt. Just another rumor put out there to instill fear and push people to vote yes. That's my opinion anyway.