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Objection to Delta's DIP financing for Pinnacle

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Quick summary of filing borrowed from elsewhere...

Delta forces Pinnacle into bankruptcy sooner by not paying them about $35 million that Delta owed them.

Delta offers DIP financing if Pinnacle will agree to insane terms for the loan.

Delta basically rolls a $40+ million debt Pinnacle owes into DIP financing, so that Delta can do everything they can to make sure they get their money, forget the rest of the creditors.

Delta forces Pinnacle to cancel contracts and return aircraft that may be against the best interests of the business.

The rest of the creditors object to all of this because they haven't had a say at all in this bankruptcy case and Delta basically predetermined what Pinnacle must do in bankruptcy.

All of those things seem to be not allowed because a creditor isn't supposed to use DIP financing as a way to coerce the bankrupt company.
 
Filed the 18th, Menke out the 19th. In comes Delta's lap dog Spanjers. I'm sure that was all just a coincidence.
 
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New Delta modus operandi: destroy your Connection carriers and strong arm them in bankruptcy. Who's next? Pretty sure XJT/SKYW won't put up with that noise.
 
It appears Trenary and Menke got Pinnacle into a really bad spot and the investors are calling them on it. It's kind of looking like Pinnacle is just damned.
 
Oakum_Boy said:
New Delta modus operandi: destroy your Connection carriers and strong arm them in bankruptcy. Who's next? Pretty sure XJT/SKYW won't put up with that noise.
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In this business, it's not as if there are many options. What else we going to do? Who else can we fly for?
 
FOrever85 said:
Filed the 18th, Menke out the 19th. In comes Delta's lap dog Spanjers. I'm sure that was all just a coincidence.
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Probably because Menke is not stupid and knows something about bankruptcy law. Look up Sub Rosa bankruptcy. Its clearly established in bankruptcy case law that a creditor cannot improve its position by providing DIP financing. Don't be surprised if this motion is granted and the DIP goes away. If that happens it looks like Chapter 7 will be the only option.
 
CRJ puppy said:
This objection was filed last week. Hearing tomorrow (April 25) at 945am in NYC. Things could get VERY interesting for Pinnacle if this objection to Delta's DIP financing is upheld. Surprised there's been no discussion of this on here...

http://dm.epiq11.com/PinnacleAirlines/Document/GetDocument/1734794
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This is pretty standard in any merger/acquisition, bankruptcy and so on. That's why nobody cares. The objection will be set aside so nothing to see here.
 
Indy319FA said:
Probably because Menke is not stupid and knows something about bankruptcy law. Look up Sub Rosa bankruptcy. Its clearly established in bankruptcy case law that a creditor cannot improve its position by providing DIP financing. Don't be surprised if this motion is granted and the DIP goes away. If that happens it looks like Chapter 7 will be the only option.
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The bankruptcy, I believe, is not subrosa (which is defined as "secret"). Being subrosa and associating it with the Chrysler bankruptcy is a leap, but could be argued in court. I believe that Delta being our DIP financier could be seen as the wolf in the chicken coup, but I think will be seen by the court as above board.

As to your statement as the DIP financier not improving its standing as a creditor is true, but try to prove that in court is another thing.

Looking forward to the future of the shell game.

BTW, I am not a lawyer, but I play one on flightinfo.com
 
Simon Says said:
The bankruptcy, I believe, is not subrosa (which is defined as "secret"). Being subrosa and associating it with the Chrysler bankruptcy is a leap, but could be argued in court. I believe that Delta being our DIP financier could be seen as the wolf in the chicken coup, but I think will be seen by the court as above board.

As to your statement as the DIP financier not improving its standing as a creditor is true, but try to prove that in court is another thing.

Looking forward to the future of the shell game.

BTW, I am not a lawyer, but I play one on flightinfo.com
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I was surprised the company (and Delta) didn't do more to get these other creditors on board. If no one objects, then there is no issue. Now that these creditors are objecting, its hard to see how the court can approve this given Delta's actions with the DIP loan (i.e. using it to pay back the 44 million Pinnacle owes Delta). Apparently these creditors are convinced they will see a better return in Chapter 7 or think the company can find a better deal for DIP financing. My guess is they think Chapter 7 is better for them unless Menke was lying about being turned down by other institutions for financing.

As to your statement as the DIP financier not improving its standing as a creditor is true, but try to prove that in court is another thing.
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I'd call the provision to pay the full $44 million outstanding on the Delta promissory note some solid evidence. It was pretty brazen for Delta to demand that when other creditors will be forced to settle for far less than they are owed. My guess is the company and Delta were hoping the other creditors would feel their best interests are served by allowing Delta to do this so the company could get financing. Obviously some now object, so it will be interesting to see how the court handles this.
 
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CRJ puppy said:
This objection was filed last week. Hearing tomorrow (April 25) at 945am in NYC. Things could get VERY interesting for Pinnacle if this objection to Delta's DIP financing is upheld. Surprised there's been no discussion of this on here...

http://dm.epiq11.com/PinnacleAirlines/Document/GetDocument/1734794
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Hearing has been delayed until May 19 to allow the creditors committee time to respond:

http://www.leveragedloan.com/pinnacle-dip-hearing-delayed-ceo-steps-down/
 
In XJ's bankruptcy it was plain as day that NWA caused the bankruptcy (NWA continued paying Pinnacle their fees while stopped paying Mesaba forcing them into bankruptcy). But yet they were able to come in and swoop up the now cheaper and leaner airline. If that was not illegal, I am sure this is going to be swept under the rug. Delta just wants to be in a position cut 200's Time to leave before that happens and if Delta gets pushed out of DIP financing-it will be a CH 7 Time to leave
 
Yeah, I would say Delta lawyers are smarter then a few of us on flightinfo trying to guesstimate how this will play out. I guess what I'm saying is I agree with xjhawk that this all went down in the last bankruptcy. It was a sham and I'm guessing the lawyers are smart enough to dot their i's and cross their t's so they can do it again. I think a lot of 200's are going to be cut from the fleet eventually. It's still early in this bankruptcy process, stay tuned. It maybe a sinking ship but at my seniority the only play is to let it play out. Getting on any where else right now carries the same odds as winning the mega ball lottery. Also years 1 through 5 at the low cost carriers in the right seat is comparable to maybe not much better then top 50% at Pinnacle. It all worked out last time at Mesaba. Hate to go to JB when maybe if u stick it out at Pinnacle you might get stapled at Delta at the end of this bankruptcy haha!! Yeah right
 
Whataboutbob said:
Yeah, I would say Delta lawyers are smarter then a few of us on flightinfo trying to guesstimate how this will play out. I guess what I'm saying is I agree with xjhawk that this all went down in the last bankruptcy. It was a sham and I'm guessing the lawyers are smart enough to dot their i's and cross their t's so they can do it again. I think a lot of 200's are going to be cut from the fleet eventually. It's still early in this bankruptcy process, stay tuned. It maybe a sinking ship but at my seniority the only play is to let it play out. Getting on any where else right now carries the same odds as winning the mega ball lottery. Also years 1 through 5 at the low cost carriers in the right seat is comparable to maybe not much better then top 50% at Pinnacle. It all worked out last time at Mesaba. Hate to go to JB when maybe if u stick it out at Pinnacle you might get stapled at Delta at the end of this bankruptcy haha!! Yeah right
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I'm just a nobody flying the line and I normally try to just listen to peoples point of views while rarely expressing my own, however this whole "theory" that Delta is is going to end up owning us and we will all be stapled to the bottom of the Delta pilots seniority list is ridiculous. Its not going to happen and for someone like myself I would rather take my chances in an interview rather than wait for a ********************-ton of pilots to flow in front of me.
 
My guess is 9E and DL management figured no one would object to DL repaying its own note at 100% because all the parties would be relieved that 9E had found DIP financing and avoid liquidation.

I don't think this will end in liquidation. My suspicion is all interested parties will come to an agreement on DIP financing and this will move on. This process is all about getting as much of your money back out of 9E as you can, and I don't see how you get more money out of Ch7 vs 11. But if one of the parties decides their best option is a liquidation then the terms of the Delta loan could be used to derail the DIP financing.
 
I agree that Chapter 7 is a very unlikely scenerio. Having DIP financing set up before entering chapter 11 is very unusual. It takes awhile for the DIP to be set up. And the fact that Menke said we couldn't find anybody to provide DIP financing might be true, but many facts are probably missing. Don't believe for a second that Pinnacle couldn't find other DIP financing if Delta is found to be the fox guarding the hen house.

Remeber this...

1. Pinnacle has cash on hand...not as much as they would like, but still has cash.
2. The main reason for the bankruptcy is the loss of money on leases of aircraft. This will be fixed shortly either through re-negotiations or give back the aircraft.
3. Another large loss of money is the jacked up way Mesaba, Colgan, and Pinnacle can jump across the fence to each company. We can negotiate that within the union...fairly easy fix.
4. Delta owes Pinnacle large sums of money.
5. Pinnacle still has cash on hand.

With these factors a DIP financier, I think, would be easy to get.
 

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