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Law360 (April 28, 2020, 5:09 PM EDT) -- Regional Alaskan airline Ravn Air Group filed Chapter 11 plan documents late Monday that said the company failed to receive any COVID-19 relief from the federal government and would be liquidating its assets instead of pursuing a reorganization.
Ravn Air said it had applied for up to $75 million in aid under the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act passed by Congress in late March in response to the spread of COVID-19 and the resulting economic instability, but that none of those applications had resulted in any grants or loans for the debtor.
"[Our lenders] advised the debtor that, in the absence of substantial CARES Act funding or other commitments that materially improved the debtors' recovery prospects, an acceptable plan would require the establishment of a liquidating trust and various of the provisions contained in the plan," the disclosure statement said.
The proposed plan would pay Ravn Air's post-petition lenders 100% of their claims for providing a debtor-in-possession financing facility that currently has disbursed about $6 million. Recovery estimates for prepetition secured debt and general unsecured claims were not included in the filings at this time.
All of the debtor's assets will be transferred to a liquidation trust, which will sell them off and distribute the proceeds to creditors, with administrative and priority claimants and general unsecured claimants receiving cash payments soon after the effective date of a Chapter 11 plan, according to the filings. Other claims will receive payments over time as the assets are sold.
The trust will also own litigation claims against various third parties that can be pursued for the benefit of creditors, but Ravn Air did not include these potential proceeds in its recovery estimates because they are highly contingent, the disclosure statement said.
Representatives for Ravn Air did not immediately respond Tuesday to a request for comment.
Ravn Air 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 earlier this month.
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 Air 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.
A hearing for final approval of the DIP loan is scheduled for Wednesday with U.S. Bankruptcy Judge Brendan L. Shannon, where the court will hear objections from the recently appointed official committee of unsecured creditors, which has argued the lender is pushing for a case timeline that didn't give Ravn Air enough time to find other sources of financing.
A dispute among Ravn Air and civic leaders in the North Slope Borough — which is home to northernmost settlement in the U.S., Utqiagvik — arose early in the case when the mayor of the borough said he would seizing Ravn Air's aircraft and ground facilities to resume service to the area. The debtor's lenders and the Alaska attorney general opposed the mayor's actions, saying they made the already precarious situation more complicated.
A resolution to that dispute emerged last week when Ravn Air and the local government reached a deal to lease the equipment and facilities to the government and to provide Ravn Air employees to staff and operate the facilities at the local government's expense.
Ravn Air 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 case is Ravn Air Group Inc., case number 1:20-bk-10755, in the U.S. Bankruptcy Court for the District of Delaware.
--Editing by Abbie Sarfo.
For a reprint of this article, please contact reprints@law360.com.
