Republic Says Unsecured Creditors to See Less Than 50% Recovery

  • Airline says stockholders unlikely to receive anything at all
  • Shareholder committee unnecessary, company tells U.S. Trustee

Republic Airways Holdings Inc.’s unsecured creditors are likely to recover less than 50 cents on the dollar in the airline’s bankruptcy, and stockholders should expect nothing at all, according to a letter from the company.

The pool of money available to pay creditors will be no greater than $275 million to $350 million and could be reduced by at least $100 million Republic will need to exit Chapter 11, the airline said in a letter to the U.S. Trustee, the Justice Department’s bankruptcy watchdog. Unsecured creditor recoveries also depend on Republic successfully restructuring as much as $1 billion in debt, the airline said.

“In light of those numbers, unsecured creditors are faced with the prospect of recovering potentially well less than 50 cents on every $1 of claims, and equity holders will therefore receive no distributions,” according to the April 4 letter, which was included in a regulatory filing.

Hedge Funds

Republic wrote to ask the U.S. Trustee to reject requests to appoint an official committee to represent shareholder interests in its bankruptcy. Such a panel would burden Republic with “substantial and duplicative costs and expenses,” the airline said. 

A large proportion of the company’s shares are held by “a small number of highly sophisticated investors, including one group of six wealthy hedge funds” that are already actively participating in the case, Republic said.

The company said it’s using the Chapter 11 process to renegotiate flying contracts with American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. to recover about $50 million a year in higher operating costs under a new labor agreement with its pilots union. The needed recovery totals as much as $400 million under the full term of its agreements with the larger carriers, Republic said.

Republic, which filed for bankruptcy Feb. 25, owns or leases about 300 aircraft and is seeking to slim down to a single family type of Embraer SA 170/175 aircraft, while returning “out of favor” types. Those include Q400 turboprops and the smaller E145s and E140s, according to court papers. The Indianapolis-based carrier also has to shed $150 million to more than $250 million of debt, lease and return obligations associated with those planes.

The case is In re Republic Airways Holdings Inc., 16-10429, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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