Starving Regional Pilot
- Feb 24, 2005
- Total Time
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.
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.