By: Mariana Calvo R.
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NHG advised on Aeroméxico’s emergence from Chapter 11 bankruptcy
Advisedan ad hoc group of senior noteholders in connection with Aeromexico’s successful emergence from Chapter 11.
Latin Lawyer’s Article:
Mexican flag carrier Aeroméxico has relied on three Davis Polk & Wardwell LLP offices and local firm Sainz Abogados to successfully emerge from its Chapter 11 restructuring, almost two years after it first entered the process.
US investor Apollo Global Management – Aeroméxico’s biggest creditor throughout its Chapter 11 process – hired Cleary Gottlieb Steen & Hamilton LLP in New York and Mexican firm Creel, García-Cuéllar, Aiza y Enríquez SC. The group became the airline’s largest shareholder after swapping debt held in the company into equity as part of the reorganisation.
Following the restructuring, Delta Airlines will hold a fifth of the Mexican aviation company’s stock. It enlisted Hughes Hubbard & Reed LLP in New York.
A group of Mexican investors hired three offices of US firm Quinn Emanuel Urquhart & Sullivan LLP to help fund a capital increase in the business, while the ad hoc group of noteholders turned to Nader, Hayaux & Goebel in Mexico City.
Holland & Knight LLP in New York and Mexico City advised UMB Bank as a collateral agent in the debtor-in-possession (DIP) financing and the exit facility documents. The firm also represented Deutsche Bank as trustee.
Aeroméxico officially exited bankruptcy on 17 March, after the US Bankruptcy Court for the Southern District of New York approved the restructuring plan on 28 January.
Akin Gump Strauss Hauer & Feld LLP in New York is also thought to have been involved in the deal, but Latin Lawyer could not confirm this prior to publishing.
The news comes exactly two months after Aeroméxico obtained a capital increase of US$4.3 billion as part of its Chapter 11 restructuring process. The same firms were involved in that transaction.
Aeroméxico filed for Chapter 11 protection in the New York bankruptcy court back in June 2020 as a direct result of the pandemic. The airline saw its annual revenue drop by 59% to 28.5 billion pesos (US$1.4 billion) that same year.
In January 2021, the airline sealed an agreement with trade and labour unions Asociación Sindical de Pilotos Aviadores de México (ASPA) and Asociación Sindical de Sobrecargos de Aviación de México (ASSA) to reduce labour costs in order to access the remainder of its US$1 billion DIP financing.
The airline now plans to spend US$5 billion over the next five years to modernise its fleet and for other corporate expenses. It aims to add 22 airplanes to its line-up by the end of the year, raising its total number of aircraft to 147. Last year, the company signed a deal to purchase 28 Boeing 737 MAX planes from US-based aerospace giant Boeing, which cost 20% less than their predecessors.
The Boeing 737 MAX has recently reappeared in the international market after being grounded for more than two years following two fatal crashes in 2019, which killed 346 people. Yesterday, the Chicago-headquartered aviation company saw its US-listed shares drop a staggering 17% in value after one of its Boeing 737-800 – an older version of the Boeing 737 MAX – impacted on a mountain range in southern China.
Aeroméxico is the second large Latin American airline to exit Chapter 11 restructuring. Colombia’s Avianca emerged from its process at the end of 2021, after eliminating over US$1 billion worth of debt. Avianca entered the restructuring procedure in May 2020, having reported a 75% revenue drop in the second quarter of that year compared with the same time period in 2019.
LATAM Airlines also entered Chapter 11 restructuring in May 2020 and is yet to emerge from the process. The regional airline obtained a US$2.45 billion DIP loan in 2020. That was followed by an additional DIP financing of US$750 million in November 2021.