Pinnacle Bankruptcy Update
AFA has been closely monitoring the Pinnacle bankruptcy process and is in the process of requesting “ex-officio” status as a non-voting member of the Unsecured Creditors Committee (UCC). Because AFA and the USW are involved in a representation election, AFA will replace the USW as a member of the UCC if AFA wins the election – a compelling reason for supporting AFA’s placement on the UCC during the election period. AFA should know if it will be on the UCC by the end of next week.
With respect to the bankruptcy itself, the most significant development to date is the April 18th filing of an Objection by a group of Pinnacle shareholders that challenges the “Debtor in Possession” (DIP) financing being provided by Delta Airlines to Pinnacle during the bankruptcy.
DIP financing is designed to help Pinnacle get through the bankruptcy process with sufficient cash on hand to pay for the airline’s daily operations. The Objection challenges the DIP agreement by alleging that Delta, as Pinnacle’s most significant and possibly only customer, has used its superior position to force Pinnacle to make changes to existing contracts with Delta that advantage Delta to the detriment of other creditors. For example, the Objection argues that the DIP agreement would force Pinnacle to “restructure, amend and immediately assume key contracts with Delta,” would provide Delta with an “allowed unsecured claim,” would “seize control of the Chapter 11 Cases through extensive conditions and milestones and plan deadlines built into the DIP agreement,” and would require Pinnacle to “sever relationships with substantially all customers other than Delta.”
AFA has spoken to the UCC’s Attorney, Brett Miller, about the Objection. Miller told AFA that the UCC is exploring other financing alternatives to Delta, and is working with Pinnacle to amend or modify some of the more onerous provisions of the DIP agreement so to ease the financial burden on Pinnacle. The Objection will be heard by the Bankruptcy Court in late May.
In the meantime, AFA will continue to monitor and assess the bankruptcy proceeding and do everything in its power to protect the interest of all the Pinnacle Flight Attendants.