Law360 (June 30, 2020, 7:34 PM EDT) -- The parent company of Advantage Rent A Car received permission from a Delaware bankruptcy judge Tuesday for the sale of its airport rental agency agreements in two transactions worth more than $17 million.
During a remote hearing conducted via telephone and videoconferencing, U.S. Bankruptcy Judge John T. Dorsey said he would approve the sales once issues relating to the treatment of contract cure costs were resolved through changes to the sale orders.
"I'm satisfied, based on the record presented, the comments of the parties and the agreements proposed by counsel during the hearing that the sale orders are appropriate and in the best interests of the debtors," Judge Dorsey said.
The sales emerged from an auction that wrapped up Sunday night and covers 16 airport concession contracts that allowed Advantage to operate its car rental locations at some of the country's largest airports. The larger deal will see Sixt Rent A Car acquire the concession agreements with 10 airports, including John F. Kennedy International Airport and LaGuardia Airport in New York City, for a total purchase price of $16.1 million.
Orlando Rentco LLC will acquire six concession agreements for $1.6 million in cash, including Hartsfield-Jackson Atlanta International Airport in Georgia. This buyer is also acquiring the debtor's intellectual property. The deal includes an earnout provision that will see Orlando Rentco pay Advantage 3% of the car rental revenue earned at the locations where it acquired the concession agreements as well as 1% of the revenue earned at any other airport locations where the buyer operates a car rental agency under the Advantage brand.
Final versions of the sale orders will reflect an agreement among the buyers, Advantage and some of the airport authorities that are counterparties to the concession agreements over the escrow of cure amounts for those agreements. The authorities had objected to the sale orders because they originally purported to escrow only the cure amounts the debtor had designated in earlier court filings, and not the amounts asserted by the authorities.
Counsel for the authority governing the Las Vegas airport concession being sold to Sixt said it was concerned about there not being enough money in the escrow to cover cure costs if the sale was approved before those costs were paid, or if the costs turned out to be higher than the debtor expected.
Attorneys representing the buyers and the debtor said the escrow would reflect the full amounts asserted by the authorities in their objections, resolving the issue. The parties pledged to amend the order and submit under certification of counsel Tuesday evening.
Advantage Holdco Inc. sought Chapter 11 protection May 27 with about $510 million in debt. Vehicle leases accounted for about $102 million of the obligations, although the company's filings did not specify the number of vehicles operating in the 29 cities and 46 primarily airport locations nationwide.
The buyers under the approved sales are not acquiring any vehicles from Advantage's fleet and banks that financed the vehicle purchases are continuing to repossess the vehicles on which they hold liens with the permission of the debtor and the buyers.
Although the May Chapter 11 marked the company's third bankruptcy in the last two decades, company officials blamed the COVID-19 pandemic in particular for driving the business into a ditch through near total leisure travel shutdowns.
The same pandemic-related collapse of business and leisure travel sent vehicle rental industry giant Hertz Global Holdings Inc. into Chapter 11 in Delaware a week before Advantage's arrival. Hertz reported that it took the step just ahead of a creditor forbearance deadline. That company entered bankruptcy with about $1 billion in cash, some $25.8 billion in assets and $24.4 billion in liabilities.
Advantage is represented by Normal L. Pernick, Justin R. Alberto, J. Kate Stickles, Patrick J. Reilley, Stuart Komrower and Taylre C. Janak of Cole Schotz PC.
Sixt Rent A Car is represented by Erin R. Fay of Bayard PA and Jacqueline Marcus of Weil Gotshal & Manges LLP.
Counsel information for Orlando Rentco was not immediately available Tuesday.
The case is In re: Advantage Holdco Inc., case number 1:20-bk-11259, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Rick Archer, Jeff Montgomery and Carolina Bolado. Editing by Orlando Lorenzo.
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