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Law360 (June 3, 2020, 6:26 PM EDT ) Attorneys representing regional Alaskan air carrier Ravn Air Group told a Delaware bankruptcy judge Wednesday that unexpected costs and a reluctance from its lenders to cover those expenses, which were exacerbated by a deadline being extended, are threatening its proposed Chapter 11 sale.
During a status conference, Tobias S. Keller of Keller Benvenutti Kim LLP said the debtor anticipates incurring an additional $1.8 million in expenses after U.S. Bankruptcy Judge Brendan L. Shannon granted a request last week from unsecured creditors to extend a case deadline by two weeks.
Along with the extra costs, Ravn is having trouble recovering $2.2 million from the U.S. Postal Service associated with mail and mail bypass work done by the debtor, Keller said.
"There is a hole right now of $4 million we're trying to fill," Keller said.
After the court's timeline decision last week, Ravn approached its lenders to inquire about increasing post-petition financing to cover the gap, but the lenders were not willing to provide more cash to the debtor.
"There is no unanimous consensus among the lenders about what to do next," David Neier of Winston & Strawn LLP, representing prepetition secured lender and DIP lender BNP Paribas, told the court. "There is only unanimous agreement they are not extending the budget because the additional $4 million is just too much."
Neier said the biggest concern is that the $12 million debtor-in-possession loan will mature before the new July 9 confirmation date for Ravn's plan, and that it remains to be seen if the estate's assets will be liquidated or if a going concern bid can be received by a June 24 deadline. Administrative insolvency is a real threat to the case at this point, he said.
As a result, Neier said the lenders intend to file a motion to reconsider the court's ruling on the case schedule, and Judge Shannon agreed to hear the motion Friday morning to resolve the timing issues with respect to confirmation of the plan
The court approved bidding procedures through which Ravn will attempt to market itself as a going concern, granting the request for a June 24 bid deadline and a July 9 sale approval hearing. Neier said having the sale deadlines firmly in place will allow for the parties to switch to a Chapter 11 plan focused on that transaction with enough time to reshape the plan documents ahead of a confirmation hearing.
Ravn filed for bankruptcy after travel restrictions due to the COVID-19 outbreak reduced its passenger load by more than 80% in March and its revenue dried up almost overnight. It owes about $90 million in secured debt held by a group of lenders led by BNP Paribas, which is also providing the DIP financing.
The debtor originally pinned its hopes to federal government aid programs created in response to the COVID-19 outbreak, but those funds never materialized.
Its proposed liquidation plan calls for the estate's assets to be transferred to a liquidating trust that will pay priority and administrative claims and unsecured creditors through initial disbursements. It will likely take up to three years for the bulk of the company's assets to be liquidated — including its air fleet — for the benefit of secured creditors.
Ravn operates three air service companies — RavnAir Alaska, PenAir and RavnAir Connect — that provide passenger, charter, freight, mail and mail bypass services throughout the state of Alaska. The company ran more than 400 flights daily and ferried more than 75,000 passengers a year before ceasing operations in April.
The company is a lifeline for some of the most remote settlements in the Northern Hemisphere, providing critical freight and mail services to get food, medicine and clothing into the hands of residents living hundreds of miles north of the Arctic Circle, according to the debtor.
Ravn is represented by Victoria A. Guilfoyle, Stanley B. Tarr and Jose F. Bibiloni of Blank Rome LLP, and Tobias S. Keller, Jane Kim and Thomas B. Rupp of Keller Benvenutti Kim LLP.
The lenders are represented by David Neier of Winston & Strawn LLP, and William P. Bowden and Gregory A. Taylor of Ashby & Geddes PA.
The case is In re: Ravn Air Group Inc., case number 1:20-bk-10755, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Adam LoBelia.
For a reprint of this article, please contact reprints@law360.com.
