Court OKs Aloha Air
A judge approves the deal
after criticizing the terms
earlier in the day
After raising concerns about Aloha Airlines' $65 million financing plan, a bankruptcy judge gave interim approval to the emergency proposal at a hearing called last night.
U.S. Bankruptcy Judge Lloyd King initially said at an earlier hearing yesterday that a proposal to give lenders Ableco Finance LLC and Goldman Sachs Credit Partners LP priority over other creditors for repayment would circumvent the bankruptcy court's discretion in administering the case.
After further arguments at a later hearing, King approved the plan. King was sitting in on the case for Bankruptcy Judge Robert Faris. A final hearing will be held on April 11 before Faris.
The new loan is secured by priority liens on the assets held by Aloha, which filed for Chapter 11 bankruptcy reorganization in December.
David Banmiller, Aloha Airline's chief executive officer, said in a statement last night that the financial agreement will give Aloha working capital for its restructuring and help it exit bankruptcy.
"I'm confident we can get through this," Banmiller said earlier yesterday. "It's just one of the challenges. My gosh, look at the past couple of years and all the jumps through the hoops our friendly competitors have had to go through," said Banmiller, referring to Hawaiian Airlines. "If you get a sense of the body language and dialogue ... everybody is really trying to, in a really compressed time period, get us across the goal."
James Peck, attorney for Ableco, had told the court that the lenders would find the financing deal unacceptable without protections. He said that Ableco and Goldman Sachs would be "unwilling to proceed" in face of such risk.
On Monday, Aloha Airlines filed the emergency motion for the approval of the loan, saying it may not be able to meet payroll if it doesn't get financing.
In previous court filings, the airline said it needs $10 million by the end of the month to meet expenses.
Ableco and Goldman Sachs are among the 45 potential lenders recently contacted by Aloha Airlines. The airline said that nine of the companies contacted were willing to provide financing but that Ableco and Goldman Sach's provide the best deal.
The annual interest rate on the Ableco and Goldman Sachs loan is 16.3 percent.
Another lender, Matlin Patterson Global Opportunities Partners II LP, recently withdrew its offer to provide financing.