Republic Airways offers to buy Frontier Airlines
Republic Airways Holdings said that it is offering to buy Frontier Airlines for $108.8 million and take it out of bankruptcy. Republic said it expects a court-supervised auction to determine if anyone will make a better offer.
According to AP, Republic supplied a $40 million debtor-in-possession loan to Frontier and held a $150 million unsecured claim, so it’s not a surprise that it is on track to buy the airline.
The plan calls for Republic to own all the equity in the newly reorganized Frontier. Republic operates a regional airline under its own name as well as Chautauqua Airlines and Shuttle America. Denver-based Frontier, known for its planes with animals painted on the tails, flies from Denver to points around the U.S.
The plan would give unsecured creditors $28.8 million in cash. An additional $40 million of the sale proceeds would repay Republic’s loan. Frontier said its current shareholders would get nothing.
A bankruptcy court judge will have to approve Republic’s offer. Republic said Frontier will seek court approval for the deal on July 13 and expects to finish the process and emerge from Chapter 11 protection in the fall.
Frontier Airlines Holdings Inc. filed for bankruptcy protection in April 2008. Republic said Frontier has posted operating profits for six months in a row.
The reorganization plan filed Monday said Frontier’s bankruptcy consultant began contacting prospective investors in January, and management met with potential investors over the next two months. But "the number of prospective investors dwindled rapidly," according to the plan, because of a combination of tight credit markets, the state of the airline industry, and the large loan and unsecured claim held by Republic.
"This agreement represents a major milestone in our ongoing efforts to position Frontier to emerge from bankruptcy as a competitive, sustainable airline," Frontier President and CEO Sean Menke said in a statement.
Republic shares fell 15 cents, or 3.5 percent, to close at $4.10 on Monday before the announcement.
Source: AP
Karen
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