Voyager Aviation Holdings Plan Profile

Legal Analysis 1 August

Voyager Aviation Holdings Plan Profile

By Sara Tapinekis

Voyager Aviation Holdings (VAH) and its affiliated debtors filed a Chapter 11 plan on 27 July, the same day that it entered Chapter 11. The aircraft lessors have not yet filed a disclosure statement, but according to the milestones set forth in the restructuring support agreement (RSA) that the debtors entered into with holders (Consenting Noteholders) of over 77% of the debtors’ 8.5% senior secured notes due 2026 (Secured Notes) and holders of preferred stock in Cayenne Aviation LLC (Cayenne) and LLC membership interests in VAH (Consenting Equity Holders), they must file the disclosure statement by 15 August.

The plan provides for the implementation of the Azorra Transaction, pursuant to which the company will sell substantially all its assets to Azorra Explorer Holdings Limited (Purchaser) for up to USD 743.5m and enter into related transactions. If the plan is not confirmed by 20 November, or if all conditions to the initial delivery of aircraft to the Purchaser (the Initial Completion) are not satisfied by 30 November, then the Azorra Transaction instead will be implemented pursuant to sections 363 and 365 of the Bankruptcy Code (the 363 Sale Alternative).

According to the first day declaration of Robert A. Del Genio, VAH’s Chief Restructuring Officer, the transaction has two principal components: (i) a purchase agreement to acquire substantially all the company’s assets other than “Participation Assets” (Target Assets), which include fourteen aircraft and the rights to acquire five additional aircraft, associated leases, executory contracts, and related rights (Purchase Agreement); and (ii) a participation agreement with respect to the company’s equity and economic interests in the Participation Assets, which include the two aircraft that were seized and/or confiscated in Russia and the related insurance and lease claims (Participation Agreement).

Prepetition debt

The debtors entered Chapter 11 with USD 412m outstanding under the Secured Notes, which are governed by an indenture under which Wilmington Trust, NA acts as indenture trustee. The aircraft-owning debtors (Aircraft Selling Debtors) also had approximately USD 460.6m outstanding under various aircraft financing facilities, which financed the acquisition and leasing of aircraft. In addition, certain non-debtor affiliates of the debtors that were formed as special purpose entities entered into a warehouse facility credit agreement with various lenders and Citibank, NA as administrative agent. Approximately USD 53.6m remained outstanding under that facility as of the petition date.

Recoveries

Certain of the debtors’ creditors are grouped into classes depending on whether they are creditors of Aircraft Selling Debtors or Participation Debtors, which include (i) Aetios Aviation Leasing 1 Limited, (ii) Aetios Aviation Leasing 2 Limited, (iii) Panamera Aviation Leasing XII Designated Activity Company, and (iv) Panamera Aviation Leasing XIII Designated Activity Company, each to the extent that they commence Chapter 11 cases. For example, holders of claims against the Aircraft Selling Debtors that arise under aircraft financing facilities will be paid in full in cash from the applicable Allocated Purchase Price[1], while the treatment of creditors holding aircraft financing claims against the Participation Debtors will vary depending on whether those creditors have executed a Participation Consent. The plan defines a Participation Consent as “the AFIC Consent Agreement (as defined in the Participation Agreement) or such other agreement between parties to the Participation Agreement with the applicable controlling Finance Parties (as defined in the Participation Agreement) to the transactions contemplated under the Participation Agreement.” Such creditors that have executed a Participation Consent will receive the treatment set forth in that agreement, while those that have not will receive the treatment required under section 1129(b) of the Bankruptcy Code, which governs the treatment of crammed down classes. This section of the Code provides that, with respect to crammed-down creditors the plan must (i) not discriminate unfairly and (ii) be fair and equitable. With respect to secured claims, for a plan to meet the “fair and equitable” requirement, creditors must retain the liens securing their claims to the extent of the claim amount, and receive deferred cash payments totaling at least the allowed amount of such claim, of a value as of the plan’s effective date, of at least the value of the creditor’s interest in the estate’s interest in such property. In a sale scenario, such liens may attach to the sale proceeds. Alternatively, the plan may provide such creditors with the “indubitable equivalent” of their claims.

Holders of Secured Notes will receive their pro rata share of the “Remaining Distributable Assets” of each debtor that is liable on such claims. The plan defines the term “Remaining Distributable Assets ” as the sum of (i) cash on hand, (ii) the Azorra Transaction proceeds, and (iii) the proceeds of liquidation of the other assets, less the amount of cash necessary to (x) fund (1) an amount to be determined by the debtors with the consent of the required Consenting Noteholders to be necessary to wind down the debtors’ estates, (2) the Convenience/Go-Forward Trade Claims Recovery Pool, which is defined in the plan as a cash pool set aside for payment of Convenience/Go-Forward Trade Claims (defined below) in an unspecified amount, and (3) a professional fee escrow in the total amount of unpaid compensation and unreimbursed expenses incurred by professionals through and including the plan’s effective date and (y) satisfy all claims that are required to be paid in full in cash – ie administrative expense claims, priority tax claims, priority non-tax claims, aircraft financing facility claims of the Aircraft Selling Entities, other secured claims, and general unsecured claims against Aircraft Selling Entities.

The plan also includes a class of a Convenience/Go-Forward Trade Claims, which are unsecured claims that would be a general unsecured claim except for the fact that (i) the claim is asserted by an individual or company that (i) is a non-U.S. citizen or (ii) provided services to the debtors during the six-month period preceding the petition date and is determined by the debtors to be critical to the consummation of the Azorra Transaction and/or the functioning of the winddown debtors during the post-confirmation transition period or (iii) the amount of such claim does not exceed an unspecified amount. If the class votes to accept the plan, each creditor that continues to provide postpetition services to the debtors, the winddown debtors and the Purchaser on the same or similar terms that were in effect prepetition will receive its pro rata share of the Convenience/Go-Forward Trade Claims Recovery Pool. If the class does not vote to accept the plan, such creditors will be treated as general unsecured creditors of all debtors that are not the Participation Debtors or the Aircraft Selling Entities (Other Debtors). Also, each such creditor that votes to accept the plan will receive an avoidance action release.

As for other general unsecured creditors, creditors holding claims against the Aircraft Selling Entities will be paid in full in cash, while such creditors holding claims against the Other Debtors and the Participation Debtors will receive any Remaining Distributable Assets that remain after senior claims are paid in full. Such creditors are deemed to have rejected the plan.

Holders of Cayenne preferred interests and VAH interests will receive their pro rata shares of Cayenne Equity Trust Interests and VAH Equity Trust Interests respectively. Each such trust will be an entity to be created on or before the effective date to hold the interests for the benefit of the respective holders. Such interest holders are not entitled to vote as they are deemed to have rejected the plan.