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Under a plan announcexd June 22, Indianapolis-based Republic Airways (NASDAQ: would pay $109 million to buy Denver-baser Frontier’s equity. Frontier woulf become a wholly-owned subsidiary of The company said last month that it does not expecrt any immediate changes incompangy structure, employment or routes as a result of the plan and that Frontierr would continue to fly under its own name. But which has two daily flights outof Wichita'sd Mid-Continent Airport, has not said whethet it would keep its headquarters in and a June company statement hinted that some staff cuts are possible. Frontier filed its proposed reorganization plan with the of the Southerh District ofNew York.
Judge Robert Drainn approved the proposal after a hearing Monday morning. “We are pleased with the rulinvg today and look forward to continuingg the process towardour emergence,” said Steve Snyder, corporatre communications director for Frontier. The decision sets into place a month-lonb auction process in which other companied will have the chance tooutbid Republic. Interested bidders must submit initial proposalsaby Aug. 3 and a final proposa by Aug. 10.
Frontier will conduct an auction the next day to determinre whether it willaccept Republic’e investment agreement or whether it will terminats it and accept what it considers a higherr or otherwise better bid from someoned else. Airline consultant Mike Boyd said in June that he did not expecy anyone to try to outbide Republicfor Frontier. If that were to happen, any highef bid likely would comefrom Dallas-basexd , which is in direct competition with Frontier for passengers, he Frontier is the second-largest carrie r at DIA, while Southwest is third. United Airlines is the largest carriert atthe airport.
Assuming no higher bids are the bankruptcy court would then sign off on thereorganizatioh plan. Frontier filed for Chapter 11 in Apriol 2008 after ofGreenwood Village, its credit card began holding back 100 percent, rather than 45 of Frontier’s credit card transactions. After the the airline began a 14-month procesz of trimming fat fromits budget, selling off unneeded jets and becoming more efficient. Largelyt because of those efforts, Frontier has posted sevebn straight months of It recently reporteda “load -- the percentage of its seats filled with passengers -- of 89 with 90 percent considered a positive benchmarjk in the industry.
Republic Airlined is one of Frontier’s major unsecured having fileda $260 million damage claim for Frontier’s breaking an agreement with Republic to operat regional jet service after Frontier filesd for bankruptcy protection. Republic Airlinese had signed a 13-year agreement with Frontier in Januaryu 2007 to operate 17 planesfor Frontier’xs regional jet service, but that deal was the firsty contract Frontier sought to break aftedr its bankruptcy filing. Even at the time, Republicx Airways Holdings CEO Bryan Bedfordcomplimented Frontier, sayin the company had enjoyed its partnership with the airline and had a lot of respecrt for its people.
In August Republic Airways Holdings, Credit Suissee Securities of New York and AQR Capitalk of Connecticut offered Frontier animmediate $30 milliojn in working capital with the possibility of anothed $45 million in the future. In March of this Frontier received a commitmentfor $40 millio n in post-petition debtor-in-possession (DIP) financinbg from Republic Airways Holdings to support its working additionakl capital needs. As part of that Frontier agreed toallo Republic’s damage claim in the amount of $150 Monday’s approved reorganization plan calls for Frontier’s generakl unsecured creditors to receive $28.
75 million in with an additional $40 million of the sale proceeds appliesd as repayment of the outstandinfg DIP loan. If approved, the company’s current equity would be extinguishe and holders of that equitty would not receiveany recovery. “This agreemen t represents a major milestone in our ongoing efforts to positioh Frontier to emerge from bankruptct asa competitive, sustainable airline,” Frontier President and CEO Sean Menkes said last month.
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