Objection to Delta's DIP financing for Pinnacle

[Indy319FA]

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.

The biggest problem Pinnacle has in finding DIP financiers is lack of assets. Delta owns all of Pinnacle's aircraft but the 900s and Q400s. DIP financiers look at what they can sell to get the money back if you don't make it out of bankruptcy. For an airline, that is usually property and aircraft. Pinnacle leases all its office space, and rents aircraft from Delta. The only aircraft they have any equity in are the 900s and Qs, and they are basically being repossessed by EDC. This was why, as an employee, I had hoped the company would be able to restructure outside of bankruptcy. I felt that if it went into bankruptcy a liquidation was very possible because I could not see how any traditional lender would give us DIP financing. The only way would be for some outside entity to help us, which would give them incredible leverage over the company. This is pretty much what has happened with Delta.

That is why this bankruptcy is so dangerous for Pinnacle. They have no assets to borrow against. That is why 20 traditional DIP financiers (if you beleive Menke) turned them down. We'll see what happens here, but if anything derails the Delta loan Pinnacle probably will not survive.

 

[Simon Says]

The biggest problem Pinnacle has in finding DIP financiers is lack of assets. Delta owns all of Pinnacle's aircraft but the 900s and Q400s. DIP financiers look at what they can sell to get the money back if you don't make it out of bankruptcy. For an airline, that is usually property and aircraft. Pinnacle leases all its office space, and rents aircraft from Delta. The only aircraft they have any equity in are the 900s and Qs, and they are basically being repossessed by EDC. This was why, as an employee, I had hoped the company would be able to restructure outside of bankruptcy. I felt that if it went into bankruptcy a liquidation was very possible because I could not see how any traditional lender would give us DIP financing. The only way would be for some outside entity to help us, which would give them incredible leverage over the company. This is pretty much what has happened with Delta.

That is why this bankruptcy is so dangerous for Pinnacle. They have no assets to borrow against. That is why 20 traditional DIP financiers (if you beleive Menke) turned them down. We'll see what happens here, but if anything derails the Delta loan Pinnacle probably will not survive.

Point very well taken.

As you can tell I came from Mesaba. I went through the bankruptcy process there and in that process we also had ZERO real assets.

But, and here it comes. Pinnacle has 1 asset that is real. Same thing that Mesaba had. A contract and a means of complying with the contract of flying that is worth hundreds of millions of dollars.

 

[ChickenSled]

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.

"Simon" Says the guy who already jumped across the fence with a full training cycle?

 

[Indy319FA]

Point very well taken.

As you can tell I came from Mesaba. I went through the bankruptcy process there and in that process we also had ZERO real assets.

But, and here it comes. Pinnacle has 1 asset that is real. Same thing that Mesaba had. A contract and a means of complying with the contract of flying that is worth hundreds of millions of dollars.

Granted but, correct me if I am wrong, but Mesaba was owned by NWA/Delta at the time and NWA/Delta assets could be used to guarantee the loan. Pinnacle is a different ballgame because it is an independent entity.

We'll see what happens here. Hopefully for my former coworkers and everyone involved the company will be able to get the Delta loan plan approved.

 

[GRAAB HIRBOUBI]

I agree that Chapter 7 is a very unlikely scenerio. Having DIP financing set up before entering chapter 11 is very unusual.

The Bankruptcy Laws were reformed just after the Mesaba/Delta/NWA filings. There were two important changes -

1. There had to be a reorganization plan before BK
2. DIP financing was required before filing.

I am not an expert and I certainly could be wrong but I remember a lot of talk about these two issues during our BK (XJ). Those 3 filings were strategically planned to take advantage of the older laws.

 

[xjhawk]

Granted but, correct me if I am wrong, but Mesaba was owned by NWA/Delta at the time and NWA/Delta assets could be used to guarantee the loan. Pinnacle is a different ballgame because it is an independent entity.

We'll see what happens here. Hopefully for my former coworkers and everyone involved the company will be able to get the Delta loan plan approved.

Consider yourself corrected. NWA pushed Mesaba into bankruptcy and any and all assets or cash flowed right up to the parent company (MAIR Holdings), who did not declare bankruptcy. NWA was in bankruptcy and proceeded to continue paying Pinnacle its fees while stopping its payments to Mesaba. Forcing it into bankruptcy. In that bankruptcy NWA swooped in and bought mesaba. How much did they buy mesaba for? I cannot remember but I know they got a good deal. Another thing to remember about that bankruptcy-why did Mesaba keep 1 CRJ and an entire training program if the "Saabs were our core business"? That line was bull******************** and everyone could see what was happening and there was some sort of need for the CRJ certificate. In this case, I think there is a reason Delta has told Pinnacle to keep its AQP program around too. Pinnacle did not want it, Delta did.

That being said, I think Delta is providing DIP financing and will ultimately tell Pinnacle that it will save money by parking a bunch of 200's-something delta has said it wants to do. Time to leave......

 

[GRAAB HIRBOUBI]

XJ Hawk is correct. But let me say it a little clearer - Mesaba was NOT owned by NWA when we declared bk. We were owned by MAIR Holdings. Mesaba Airlines went BK, MAIR did not. In fact MAIR provided some of the financing.

In fact something I always found funny in that situation was Mesaba sold itself to NWA, MAIR didn't sell us. That was a separate transaction. To be honest I felt NWA would buy us until they started Compass. When they announced purchasing us a lot of us were very surprised.

This situation is only getting worse not better. We'll survive but who knows what form or shape. Good luck to us all...

 

[B-J-J Fighter]

Will the Bloch award be used for the downgrades and furloughs Will many CJC Cpts keep there cpt seats since all their airframes are leaving the fleet, I have talked to some cjc guys and they say the company and union are interpreting the bloch award different. Any truth to that ?

 

[Indy319FA]

Consider yourself corrected. NWA pushed Mesaba into bankruptcy and any and all assets or cash flowed right up to the parent company (MAIR Holdings), who did not declare bankruptcy. NWA was in bankruptcy and proceeded to continue paying Pinnacle its fees while stopping its payments to Mesaba. Forcing it into bankruptcy. In that bankruptcy NWA swooped in and bought mesaba. How much did they buy mesaba for? I cannot remember but I know they got a good deal. Another thing to remember about that bankruptcy-why did Mesaba keep 1 CRJ and an entire training program if the "Saabs were our core business"? That line was bull******************** and everyone could see what was happening and there was some sort of need for the CRJ certificate. In this case, I think there is a reason Delta has told Pinnacle to keep its AQP program around too. Pinnacle did not want it, Delta did.

That being said, I think Delta is providing DIP financing and will ultimately tell Pinnacle that it will save money by parking a bunch of 200's-something delta has said it wants to do. Time to leave......

Thanks XJ. I couldn't remember the exact timing of the buyout. I knew NWA management screwed Mesaba over. Hell they screwed everybody over and now they are all in the corporate suite at Delta.

I think Delta has something in mind for 9E and it won't be good for the employees in the end. We'll see if the other creditors go along with Delta's plan for the DIP financing, and how all this plays out. Hopefully it will have minimum impact on the employees at 9E.

 

[xjhawk]

I have only heard the conference call and the unions stance. The seat slots are in effect for what....four more years. I guess in this scenario, this is the only way the block award will help me. But I do not really want to be a 200 captain in JFK. If they were slots associated with bases......now that would be nice. I would think the company would like the block award. As they now do not have to train all the colgan captains as 200 captains, then train the displaced 200 captains as crj FO's, this way, they just have to train them as FO's-the displacements will be the furloughs. How else would they think it should go? Out of seniority furloughs is the only other way that could help them more. Unless I am not seeing something. Can anyone else add something?

 

[GRAAB HIRBOUBI]

The furloughs will go in reverse seniority order any capt displaced whether, 9e, 9l, XJ will move to where there seniority will hold.

Before saying you want out of seniority furloughs remember this...if you want it for the Q's what are you going to say when they get rid of the 200's? Does your opinion change when it involves the aircraft you're on?

I didn't like the Bloch award. But nothing will change it. Now we need to protect the list, furlough in reverse order, and try to find something else. If we allow out of seniority furloughs, that will follow us to every company we go to.

 

[DoinTime]

NWA was in bankruptcy and proceeded to continue paying Pinnacle its fees while stopping its payments to Mesaba. Forcing it into bankruptcy. In that bankruptcy NWA swooped in and bought mesaba. How much did they buy mesaba for? I cannot remember but I know they got a good deal.

NWA purchased Mesaba for $145 million in 2007. Delta then sold Mesaba to Pinnacle for $62 million in 2010. IMO....Not a very good investment on their part.

 

[Raoul Duke]

This objection was filed by shareholders. They will get blown out regardless of who gets the DIP financing. Since Delta is the largest creditor and has the ability to enforce its default rights (PNCL was in default of the DCAs prior to filing) they get to call all the shots. Expect this to get approved by the court without issue.

 

[Simon Says]

Granted but, correct me if I am wrong, but Mesaba was owned by NWA/Delta at the time and NWA/Delta assets could be used to guarantee the loan. Pinnacle is a different ballgame because it is an independent entity.

We'll see what happens here. Hopefully for my former coworkers and everyone involved the company will be able to get the Delta loan plan approved.

At the time of Mesaba's bankruptcy Mesaba was not owned by Northwest. We emerged out of bankruptcy with Northwest buying us.

 

[Simon Says]

"Simon" Says the guy who already jumped across the fence with a full training cycle?

True that I jumped the fence, but doesn't change the fact that the company is losing with how and when I jumped.

But I still believe in senority and wouldn't change my stance on senority. The union will probably be forced by the courts to negotiate a different deal. Just my oppinion...doesn't make it right or wrong.

 

[Flyer1015]

But I still believe in senority and wouldn't change my stance on senority. The union will probably be forced by the courts to negotiate a different deal. Just my oppinion...doesn't make it right or wrong.

You lucked out. Ask your 2000-2001 DOH colleagues what they think of "seniority" when they are below 2006 DOH 9E and 2007 DOH 9L pilots.

 

[fam62c]

The whole US bankruptcy system is insane. It allows weaker companies to reorganize and then come back and compete (with a court imposed lower cost structure) with stronger companies causing more bankruptcies. It rewards the weak and punishes the strong resulting in weaker industries. If bankrupt carriers were forced to liquidate this industry would be a lot stronger. We need some corporate darwinism to strengthen the gene pool. Bankruptcy, at least in this industry, is just another form of regulation. In this case it regulates industry labor cost structure.

 

[twott driver]

That's pretty much the gist of it. And management use it to it's fullest advantage. I wouldn't be surprised if all airline managers got together once every couple of years at a Vegas strip-club to decide who's turn it was next.

 

[www.]

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.

And whom do you think will be there to pick up the large 70 seat + airframes? Yep. JA.

 

[xjhawk]

JA? Bosnia Air? Thats what the search turned up. lol Yeah I tend to think in the short term a out of seniority order furlough would benefit most but in the end no one SHOULD EVER want to have that happen. The future we would have to live with would suck. Imagine anytime an aircraft is parked, and you are on that aircraft, you would lost your job. ALPA would do the right thing and defend the ALPA seniority list with its full team of attorneys. But then again....who knows the future.