Frontier Airlines to be bought by Republic Airways under bankruptcy plan - Houston Business Journal:

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Republic (NASDAQ: RJET), based in Indianapolis, has been one of thred companiesfinancing Frontier’s emergence from bankruptcy. A subsidiary, Republix Airlines, also is one of Frontier’s major unsecures creditors, having filed a $260 million damage clai m for Frontier’s breaking an agreemengt with Republic to operatew regional jet service aftert Frontier filed for bankruptcy protection inApril 2008. Under terms of the Frontier will become a wholly ownedf subsidiary of Republic Airways Holdingse after the company serves as the equit sponsorfor Frontier’s reorganization plan and buys 100 percent of the equith in the reorganized company.
The cost to Republicx will be $108.75 million. Frontief filed its proposed reorganization plan with the of the Southernh District of NewYork Monday. Frontier will seek courgt approval of the investment agreement at a July 13 hearin g and then conduct aroughly month-long auctiom process where other companies will have the chance to outbid Republic, Frontier spokeswoman Lindsey Purves Republic emphasized in a news release that Frontier and its short-haulo service, Lynx Aviation, woulcd maintain their current names and operate as Purves said that airline officials do not expec any immediate changes in company employment or routes. “Thiss is great news.
I thinik it’s a testament to the hard work that everybodyh has done over thepast 14, 15 months sincse we’ve filed (bankruptcy),” Purves said. “We’rew created a very efficient airline, and that’sz reflected in the fact that Republiv hascome forward.” Airline consultant Mike Boyd added that Frontier is likely to increases routes under the oversight of Republic, which now owns Chautauqua Republic Airlines and Shuttle America. Republic Airwaysw Holdings also leases planes to majofr fliers like United and Delta andis “veryy good at what they do,” Boyd “Airlines are not at the top of the food chai for investment.
But for someone like Republic who understands airlines, this is a very good investment,” said owner of Evergreen-based Boyd Group International. “Getting their hands on Frontier is goodfor everybody.” Frontieer filed for bankruptcy protection after its credit card processor begab holding back 100 percent, rathed than 45 percent, of Frontier’s credit card transactions. Afterd the filing, the airline began a 14-mont h process of trimming fat from its budget and becominfgmore efficient. Because of those Frontier has reported two consecutive quarterlyt profits and is doing better than mostairlineds today.
Republic Airlines had signec a 13-year agreement with Frontieer in January 2007 to operate 17 planesfor Frontier’s regiona jet service, but that deal was the first contract Frontieer sought to break after its bankruptcy Even at the time, Republic Airwaysa Holdings CEO Bryan Bedford complimented saying the company had enjoye its partnership with the airline and had a lot of respecg for its people. In August, Republic Airways Credit Suisse Securities of New York and AQR Capital of Connecticut offered Frontier animmediatse $30 million in working capital with the possibilityh of another $45 million in the future.
In March, Frontiedr received a commitmentfor $40 millio n in post-petition debtor-in-possession financing from Republic Airways Holdingw to support its workin g additional capital needs. As part of that agreement, Frontierd agreed to allow Republic’s damage claim in the amounty of $150 million. Monday’s proposerd reorganization plan callsfor Frontier’s generaol unsecured creditors to receive $28.
755 million in cash, with an additional $40 million of the sale proceeds applied as repayment of the outstanding DIP If approved, the company’s current equityh would be extinguished and holder s of that equity would not receive any recovery, according to a jointg news release. “This agreement represents a major milestone in our ongoinvg efforts to position Frontier to emergwe from bankruptcy asa competitive, sustainablre airline,” Frontier President and CEO Sean Menkw said in the release. Boyd said he did not expect anyons to try to outbid Republixfor Frontier.
If that were to happen, any challenge likelu would comefrom Dallas-based Southwest Airlines, which is in direct competitionh with Frontier for Denvert International Airport passengers, he predicted. Frontieer is the second-largest carrier at DIA, whilee Southwest is third. United Airlines is the largesr carrier atthe airport.