Yucaipa takes over Aloha suit

The airline's lender will proceed with litigation against Mesa

It took a second attempt in federal Bankruptcy Court, but Yucaipa Corporate Initiative Fund I, LP, the majority investor of bankrupt Aloha Airlines, will take over the carrier's 2006 lawsuit against go! parent Mesa Air Group Inc.

The bidding process hit a snag earlier this month when Judge Lloyd King called the possible sale "totally unfair" because it may have excluded other potential bidders because of a lack of notification.

King gave Mesa time to put in an offer to rival that of Yucaipa, which remained the lone bidder yesterday with a $10 million credit offer that will reduce the $116.7 million it is owed by Aloha.

Aloha's primary lender, GMAC Commercial Finance LLC, is the first secured creditor in the bankruptcy and is owed about $40 million following the sales of Aloha's cargo and aviation contract services units. Yucaipa is the second secured creditor.

King ruled in favor of the 5 percent of net recovery Yucaipa and GMAC have promised Aloha, overruling a recommendation by Cuyler Shaw, an attorney representing the state of Hawaii, asking for 10 percent. King previously suggested a fixed price instead, expressing concern for what Aloha would keep.

"Any recovery on the 5 percent would come into the bankruptcy estate and the trustee will distribute the funds along with other funds of the estate to the creditors in the order of priority -- to unsecured creditors," Chuck Choi, an attorney for Aloha Chapter 7 trustee Dane Field, said in an interview.

The order will be signed today, he said, with no appeals expected after Mesa attorneys Evan Jones and Robert Marks agreed to the ruling on the stipulation that Mesa's counterclaim rights are preserved. On Tuesday, Mesa filed an objection to the sale.

Marks also suggested at the hearing that the Oct. 28 trial date, given time constraints, "is pretty much gone at this point." A rescheduling hearing is set for June 30 in U.S. District Court.