Intrepid files rival Skymark plan

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By TESTCustomwebLP TESTCustomwebLP June 3, 2015 21:17

Intrepid files rival Skymark plan

Skymark Airlines’ largest creditor, Intrepid Aviation, which is owed some ¥100 billion from Skymark – about a third of its total debt of ¥320 billion – has submitted its own rehabilitation plan for the Japanese carrier opposing the one submitted by Skymark on May 29 that aims to set its debt repayment ratio at 5%.

In a statement to Japanese press, Skymark said the feasibility of the Intrepid plan “is not clear at all” and offers a lower repayment rate for creditors’ claims. Skymark has been asked for further clarification on this statement but it was not available at the time of publication.

The specific details of the new plan are confidential but are understood to exclude sponsor All Nippon Airlines (ANA) and include a new, unidentified, partner that would be willing to take on the A330 leases from Intrepid and possibly the Airbus A380s. The identity of this new party has not been disclosed, however, prior to ANA’s involvement, it was well publicized that Skymark received interest from several airlines. Foremost of these was AirAsia, which is reported to have proposed a merger between its Japanese unit and Skymark earlier this year, while American Airlines and Delta also expressed interest at the same time in some sort of partnership with Skymark but only after it had adopted a firm rehabilitation plan. Other investors that expressed interest at the time included: Orix, HIS, Daiwa Securities, Shinsei Bank, Sojitz and Nihon Kotsu.

None of the parties involved in Skymark’s rehabilitation have commented to Airline Economics on the current situation although Intrepid Aviation did offer a formal statement.

“Our ultimate goal is to see a successful rehabilitation of Skymark; that has been our goal since day one,” said Franklin Pray, chief executive officer of Intrepid Aviation. “However, recent actions by other parties have increased the chance of a liquidation, which is in essence a bankruptcy. This has to be avoided at all costs because the creditors, employees and the Japanese consumer would suffer. We have filed an alternate plan to that filed by Integral and ANA. We believe that plan will offer the best opportunity to preserve Skymark as the third largest independent airline at Haneda airport. It is in the best interests of Skymark’s 2,500 employees, all of the suppliers and the creditors. Our plan minimizes the damage to all creditors and will therefore result in a higher recovery rate to all of us. We believe that the majority of the creditors will therefore vote for our plan.”

Pray adds: “If Skymark’s creditors, of which Intrepid Aviation is the largest, Airbus is the second and Rolls Royce is the third largest creditor, vote against the plan filed by Skymark, the airline will go into liquidation. We don’t want that; we want a plan that is going to be approved by the major creditors. We have been working with our partners, the other creditors, on the successful rehabilitation of Skymark since the middle of last year – even before the airline entered the civil rehabilitation process.  We have had months of very constructive negotiations but on May 13, we were surprised and disappointed that one of those partners unilaterally cancelled the commercial agreement with us. We needed to act in order to prevent the liquidation in case the majority of the creditors would not approve the plan, which has now unfortunately become a real possibility.”

No further details were officially disclosed by the parties in the transaction, with many contacted refusing to comment. Airline Economics’ sources suggest that it was ANA that reneged on a commercial deal with Intrepid as well as Airbus that prompted the new plan from Intrepid. Airbus, however, did not confirm this, saying “Airbus does not comment on commercial discussions with customers. The issue of the claim is for the courts to decide”.

The predicted rejection of the ANA/Skymark plan would likely cause the airline to fail, which would mean that those valuable Haneda slot pairs are reallocated to other Japanese carriers.

This situation has caused a flurry of rumours in the market as to whom was to blamce for the split between Skymark, ANA and its creditors on the first plan. As none of the details can be substantiated at this time, these rumours remain only hearsay, for now. Calls to ANA’s media line were unanswered at the time of publication due to the time difference. We will however continue to monitor this situation and a full analysis will appear in the next issue of Airline Economics, Issue 26, which will be out at the end of the week.

Any rehabilitation plan needs to be approved by creditors owed more than half the overall debt, in terms of numbers and volume. Skymark has said to the press that it is confident that if both plans are approved by the court, the majority of creditors would give their consent for its offering at their meeting in July. Equally, Intrepid is confident its plan will prevail and has the majority of the creditors backing.

The next step is for either plan to be accepted or rejected by the court – this will take 1-2 weeks. However, it has been reported that the courts will not support Skymark’s plan without the support of the creditors – the statement from Intrepid today makes that seem less likely, even though Skymark has expressed confidence it will be approved.

Given that there are now two plans, the court could decide to delay, or reject the plan filed by Skymark. Theoretically there would have been a vote on that plan at the end of this month or in early July, but if the creditors have already expressed they are not willing to support the plan, there would be no reason to wait for that vote to take place and it would be rejected. The court cannot approve two plans, however. We will continue to monitor developments on this evolving story.

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By TESTCustomwebLP TESTCustomwebLP June 3, 2015 21:17