Below is our initial take on recent bankruptcy-related developments:
After emerging from a Chapter 11 reorganization in March, the airline has once again filed for bankruptcy protection.
S&K Take: The big news in the restructuring world this short week has been the Spirit chapter 22, which filed on Friday, August 29. Virtually everyone will recall that Spirit emerged from its prior bankruptcy about 5 months ago having completed only a balance sheet restructuring. The prior filing wiped out about $795 million in debt but clearly did not cut enough. The Debtors assert that this filing (which is the Debtors’ first real bankruptcy) was precipitated by an AerCap default notice, which impacts a significant portion of its fleet. The Debtors, for their part, promise that this bankruptcy will utilize all of the tools in the Debtors’ toolbox, including lease and contract rejections. The Debtors drew down $275 million on their RCF, so they have an ample war chest with which to wield the chapter 11 powers they described at the first day hearing.
Recent court filings have allegedly revealed that Merit Street Media executives planned to shift assets and staff over to a new media venture by way of filing for bankruptcy.
S&K Take: As predicted, we are revisiting the Merit Street bankruptcy case. Last we discussed, we called it a glorious mess. It has not disappointed. Since we checked in on July 25, the Debtors decided to seek dismissal of their own case, with Debtors’ counsel seeking to withdraw as counsel since they were about 50% short on payment of their fees (after the Court denied a DIP draw). The Court, in Lee Corso fashion, said “not so fast my friend,” declining to dismiss the case. Instead, the Court permitted funding to get the case to September 2, when the Court would consider the motion of antagonists Trinity Broadcasting and Professional Bull Riders LLC to dismiss or convert the case. On the way, the Debtors assert they have cut a deal with the UCC to provide a recovery to all unsecureds, although the details of that have not been disclosed (and Trinity and PBR are not on board). Discovery has also been ongoing, with Trinity and PBR alleging that they have uncovered smoking gun email and text correspondence (detailed in the linked article) which definitively proves that Merit was out to screw them (in legal terms). The Debtors have now requested and been granted access to a $10 million unsecured DIP (yes, unsecured) to pay its professionals. That will get us to September 16 and 17, where the Court will hear Trinity’s and PBR’s motions.
