AIM.TO - Aimia

[wabuffo]

https://document.epiq11.com/document/getdocumentbycode/?docId=3846171&projectCode=AEM&source=DM

 

Another invoice from legal counsel, and more 'PLM' references.  This is from Davis Polk & Wardwell, Debtor's counsel and what makes it interesting is that the billing is for Jan 2021.  The Stipulation for PLM extending the deadline for PLM to file its claim was approved on 1/15.  Yet this invoice continues to make references to PLM agreements, and calls to discuss, etc well to the end of the month.  At one point there is even a call with Apollo (the DIP lender).  You can open this up in Adobe and use the FIND command with "PLM" to quickly skip through the invoice....

 

So lots of 'PLM' tracks in the snow....where do they all lead?

 

wabuffo

[bizaro86]

I don't own the prefs here, but am interested in them. Does anyone know if they declared the Q1 dividend? I couldn't find anything saying they had...

[wabuffo]

More interesting tidbits from the Aeromexico BK court filings - this time from Aeromexico's Mexican legal counsel's invoices thru end of Dec. 2020.  So far nothing has made it beyond this invoice detail.  PLM was given an extension to file a claim til Feb. 16th - that came and went.  So while there seems to be lots of behind-the-scenes discussions among the various parties and their legal counsels, nothing has been brought to the Court for approval as yet. 

 

https://document.epiq11.com/document/getdocumentsbydocket/?docketId=894011&projectCode=AEM&docketNumber=982&source=DM

 

Interesting snippets:

Review and comments to new draft of the Stipulation to be filed before the Court regarding the assumption of PLM agreements and the authorization from PLM and Aimia to Aeroméxico for the latter to grant pledge over interest in PLM's Trust

Review and drafting of comments to the PLM's stipulation containing PLM's and Aimia's obligation to authorize the granting of pledge over Aeroméxico's beneficiary rights under the PLM Trust (1). Coordination with Aimia's Mexican counsel (Eduardo González) in connection with the Mexican corporate documents required to be executed in such regard

Review and comments to final version of PLM's stipulation regarding PLM's agreements to grant pledge over shares to secure the DIP Financing.

Review and comments to the final version of the PLM Stipulation to be filed before the Court which will include, among other matters, the approval of the pledge of Aeroméxico's equity interest in PLM's trust

 

I mean there's been a lot of different angles being pursued here.  PLM (and Aimia) have been trying to get Aeromexico to assume the PLM contracts and agreements which they have not to-date.  Meanwhile, there are hints that Aeromexico needs more BK financing.  Here we see Aeromex trying to get permission from Aimia and PLM to permit it to pledge its equity interest in the J-V towards DIP financing.  Previously - there were details about getting another loan/seat pre-pay from PLM.

 

Despite all this back-and-forth, nothing has made it onto the Court Docket.  There's also the strange omission of the PLM financials from the BK-remote subsidiary financial filing.  Perhaps we get more clarity next week when Aimia publishes its earning release.

 

wabuffo

[wabuffo]

More legal invoices, more PLM chatter - this one is the Mexican legal counsel's January billing.  Of note, references to AIMIA are starting to appear in the invoice details for late January.

 

https://document.epiq11.com/document/getdocumentsbydocket/?docketId=894465&projectCode=AEM&docketNumber=992&source=DM

 

Here's an example:

Analysis of PLM's corporate governance and drafting of memorandum in connection thereon (2). Review and comments to PLM's memorandum containing the different rights and scenarios of assuming, rejecting or buying out Aimia's shares in PLM (1.7). Weekly conference call with DPW and Alix Partners to discuss current situation and next steps regarding PLM (0.5).

 

Who knows what is really going on - but there are a lot of billable hours being spent on PLM by lawyers in all three counties (US, Mexico, and Canada) since November with activity really picking up in January. 

 

We'll see soon enough I guess....

 

wabuffo

[Cigarbutt]

^It's not much of an input but Club Premier is still offering new promotions.

https://www.clubpremier.com/mx/promociones/hoteles/bono-con-choice-hotels/

[wabuffo]

AIMIA makes an announcement....not PLM-related, instead its Kognitiv-related.

 

https://www.aimia.com/wp-content/uploads/2021/03/Aimia-Announces-Kognitiv-Transaction-with-IRI-Press-Release-vF-newswire.pdf

 

Toronto, March18,2021–Aimia Inc. (TSX: AIM), aholding company, is pleased to announce that Kognitiv, aB2B technology growth company of which Aimia owns a 48.9% equity stake,has entered into a sales transaction and partnership agreement with IRI®,a global leader in innovative solutions and services for consumer, retail and  media  companies.  IRI  will  acquire Intelligent  Shopper  Solutions  (ISS),  a  leading  retail  consumer  insight provider that enables collaboration between retailers and suppliers, from Kognitiv for undisclosed terms.

 

ISS is half of what AIMIA smashed into Kognitiv. I think this is the old UK-based Loyalty Marketing Group portion.  Seems like a lot of churn already at good old Kognitiv - its not even the one year anniversary of the merger.

 

wabuffo

[wabuffo]

https://www.aimia.com/wp-content/uploads/2021/03/Press-Release-Aimia-Announces-Sale-of-BIGLIFE-equity-stake-to-AirAsia-vFinal-clean.pdf

 

Aimia trades its 20% stake in the loyalty program of AirAsia (BIGLIFE) into common shares of the underlying airline.

 

I wonder if we also see some underlying transaction in PLM/Aeromexico soon as well.  Looks like part of what I thought might have been a sticking point doesn't appear to be one - i.e., Mittleman doesn't mind owning shares in the underlying airline.  Of course, that deal would have to be post-emergence of Aeromexico from Chapter 11. 

 

But this deal with AirAsia does seem to signal to me that the PLM transaction if/when it comes might be partly paid for in Aeromexico common shares.  Of course, I could be wrong about that.

 

wabuffo

[wabuffo]

I continue to be fascinated by the amount of billable hours that Aeromexico's American and Mexican legal counsels as well as their restructuring and financial advisors are putting into studying PLM Premier lately.   The latest invoice filings from three firms and some of the snippets from their timesheet back-ups:

Special Mexican Counsel to Debtors:

2/22/21 Review and analysis of the new PLM docket assessing the possible outcomes against PLM and AIMIA

2/23/21 Conference call with Apollo's external advisors to explain the alternatives on PLM and the Club Premier Program

2/26/21 Conference call with FTI (as advisor for UCC) to explain options regarding the Club Premier and PLM relationship and consequences therein

Alix Partners (Restructuring Experts):

1/10/21 Prepare questions (Diligence List) to PLM on the need to evaluate commercial terms of loyalty program

1/11/21 Review workplan and send additional updates for project to evaluate PLM contract assumption / rejection

1/12/21 Review legal documents and draft motion re PLM contract assumption / rejection

1/14/21 Review legal documents and financial models related to PLM contract renegotiation strategy

1/18/21 Review legal and industry documents re: Airline Loyalty programs and PLM contract strategy

1/28/21 Review memo from Sainz Abogodos on PLM ability to reject contract and alternatives

Davis Polk & Wardwell LLP – Debtor Counsel

2/23/21 review and revise presentation on PLM; call with Apollo team regarding PLM

2/24/21 review PLM Trust Agreement

That's a lot to process and who knows where this is all going.  But its clear that they are trying to do something.....

wabuffo

[wabuffo]

Hope everyone doesn't mind my continuing to riff on this name - particularly on the invoice details from all of the advisors to the Aeromexico Ch. 11 case.   As always - I don't think there is a specific takeaway or strategy that one should leave with - other than the fact that enormous amounts of billable hours continue to churn on all things PLM-related.

First - I should also mention that an updated Periodic Operating Report was posted for PLM's six month financials as at year-end 2020.  Remember PLM's financials were curiously omitted in the previous report.  Here's the link:

https://document.epiq11.com/document/getdocumentsbydocket/?docketId=897079&projectCode=AEM&docketNumber=1044&source=DM

Ok - back to the Ch.11 advisors' invoice details.   A recent one by FTI consulting for February had some interesting comments related to each billing detail entry with respect to PLM.  First the link:

https://document.epiq11.com/document/getdocumentbycode/?docId=3879723&projectCode=AEM&source=DM

Here are some snippets:

Quote

 

FTI Consulting:

2/22/21 Prepare summary of similar customer loyalty transactions for PLM presentation re: Air Canada and Aeroplan

2/22/21 Prepare summary of similar customer loyalty transactions for PLM presentation re: Avianca and LifeMiles

2/22/21 Review of draft deliverable for UCC summarizing PLM and loyalty repurchases.

2/25/21 Research Use of Proceeds in DIP credit agreement for potential use with PLM purchase

2/25/21 Discuss PLM contract assumption with team, including, Debtor's materials and basis for potential rejection damages claim in contract

2/26/21 Correspond with AlixPartners and MoFo on rejection damages estimate in PLM contract assessment

 

FTI spent quite a bit of time doing other loyalty buy-out comparables for PLM (Aeroplan, LifeMiles)plus made references to a "PLM Purchase".   The flip side is that there are also references to "rejection damage" estimates for Aeromexico rejecting the PLM commercial and financial contracts.

Now a bit of caution is warranted here.  FTI Consulting works for the Unsecured Creditors' committee (and not the debtors, Aeromexico).   So these initiatives could be defensive in nature as the unsecured creditors have the most to lose in a Chapter 11 Plan of Reorganization after the Aeromexico equity holders.

Still the focus on PLM isn't just from the FTI.  Literally, every legal, financial and consulting advisor has some references (some detailed, some generic) to PLM in all of their invoices.

We'll see if this leads to something (either good or bad) for PLM and Aimia or leads to an acceptance of the status quo because all alternatives have been thoroughly vetted and dimensionalized.

wabuffo

Edited April 5, 2021 by wabuffo

[wabuffo]

Now that I'm a bagholder (again) - I have started to follow this POS more closely (again).   I would say from recent filings that Aeromexico is poised to assume all of the contracts governing the PLM Premier relationship.  This has been a sword of Damocles hanging over the head of PLM (and Aimia) since the start of the Chapter 11 case.   Of course, that's not certain - but the clues in the Ch. 11 filings seem to be pointing to it.  Perhaps that's why AIMIA's share price has been going up (or not).

First, Aeromexico has scheduled a hearing to assume certain executory contracts and leases (except aircraft and engine leases) for April 21st. (responses due to this motion due April 16th).

https://document.epiq11.com/document/getdocumentsbydocket/?docketId=898098&projectCode=AEM&docketNumber=1064&source=DM

Second, in a filing by MoFo (legal advisor to the unsecured creditors), they kind of let the cat out of the bag, I think.

https://document.epiq11.com/document/getdocumentbycode/?docId=3880922&projectCode=AEM&source=DM

Of course, nothing is guaranteed - but if the PLM contracts are assumed, that would be good news (perhaps somewhat reflected already in AIMIA's share price - surely, I'm not the only one reading the Aeromexico Chapter 11 filings).  Where will it lead from there?  Who knows?

wabuffo

Edited April 9, 2021 by wabuffo

[wabuffo]

More evidence that Aeromexico is getting ready to assume all of the contracts associated with PLM Premier.  Aeromexico filed a motion for the Court to approve its process for assuming selected contracts.

https://document.epiq11.com/document/getdocumentbycode/?docId=3884125&projectCode=AEM&source=DM

The amended filing includes this addition (vs the original - new sections are in blue and underlined).

Aeromexico needs PLM (and Aimia's permission) before either assuming or assigning these contracts. 

wabuffo

[wabuffo]

It looks like there is a brewing problem between Aeromexico and Aimia over PLM.  There's a few filings up on the Court Docket from AIMIA, PLM and the Mittlemen.  Here's one from Phil Mittleman that summarizes the situation.

https://document.epiq11.com/document/getdocumentbycode/?docId=3885591&projectCode=AEM&source=DM

 

 

Ok I only posted this part because it confirms my priors.  To wit,  Aeromexico took the money from PLM and gave nothing back to AIMIA except an empty promise of a minimum floor price sometime in the future....and then went straight into bankruptcy even though they promised they wouldn't to AIMIA (fingers crossed while making that promise, of course). 

Anyway - where we are is confusing.  The Mittlemen (LOL) appear to believe they co-operated with Aeromexico during the last few months (which I've noted has seen a ton of activity from Aeromexico's advisors) on a contract assumption such that all of PLM's agreements with Aeromexico would continue to be in force.  Then once again, Aeromexico had fingers crossed again!

From the latest invoice filings - I don't think Aeromexico is still considering the buyout - I think we are back to base case which is assumption of the PLM contracts.  But the partnership between Aeromexico and AIMIA is showing signs of strains.   The stipulation that AIMIA (and PLM) wants signed is one where Aeromexico agrees to assume the contracts (including the ones that guarantee repayment of the $100 million repayment to PLM.  It looks like Aeromexico is creating noises that they may reject these and turn the $100m into an unsecured claim or saying nothing at all and letting PLM (and AIMIA) continue to twist in the wind.

The advisor invoices are up to the period ending with the February month - and we haven't seen any additional advisor invoices for March or April.   Is something up since the last invoice filings?  We'll see.  But it looks like the Mittlemen are finally starting to worry that maybe they are being played by Aeromexico.

wabuffo

Edited April 22, 2021 by wabuffo

[Dr. Aybolit]

Wabuffo -  good sleuthing as always.  it does look more contentious that I'd have imagined it would be at this point in the process, but good to hear they got a signed stipulation for PLM's contracts to be assumed, which I'd think would be hard to break, given it was signed during the bankruptcy on 12/31/20, so i think that makes it an administrative claim if breached and thus first in line for recoveries, i think...   anyway, here's what Debtwire reports on the matter:

 
COURT: Aeromexico loyalty program JV asks for settlement enforcement
22 April 2021 | 18:53 EDT    
    
Transportation | Mexico 

     
PLM, the loyalty program joint venture between Grupo Aeromexico and Toronto-listed AIMIA, has asked the New York court handling Aeromexico’s Chapter 11 proceeding to force the Mexican airline to abide by a settlement agreement signed between the parties in December, according to a motion for an order filed by the JV today.
Loyalty consolidator AIMIA holds a 48.9% stake in PLM, with the remaining 51.1% held in a Mexican trust and voted as directed by Aeromexico, as reported. The filing of the motion was approved by AIMIA in its capacity as non-conflicting shareholder of PLM, the document shows.
Aeromexico signed a definitive agreement with AIMIA in May 2020, which included USD 100m in financial support funded by PLM’s cash. Following an initial USD 50m loan, a second USD 50m tranche was disbursed on 29 June, only one day before the airline filed for Chapter 11.
As a general deadline for Aeromexico creditors to present their claims under the Chapter 11 was set for 15 January 2021, the airline and AIMIA agreed to extend the period for PLM and Aeromexico’s partner to file their claims under the bankruptcy proceeding shortly before that date.
Today’s motion showed that Aeromexico, AIMIA and PLM had already agreed upon a settlement regarding the claims at the time, though. The parties signed the agreement on 31 December 2020, according to the motion filed by PLM.
“However, mere days after executing the Stipulation, the Debtors informed PLM and Aimia that the Debtors [parent Aeromexico and three subsidiaries] intended to breach the Stipulation and would not timely present it to the Court for approval as required thereunder,” PLM’s lawyers noted in the document. “The Debtors have given PLM and Aimia various excuses for their failure to perform under the Stipulation —generally, claiming that they required additional diligence information regarding PLM and the Club Premier Agreements.”
At some point, the airline indicated that the diligence process was intended to consider a buyout of AIMIA’s stake in PLM in lieu of assumption. During all these months, PLM and AIMIA provided Aeromexico with all the requested information, and even accepted that the company shared the information with other stakeholders, according to today’s motion.
“PLM and Aimia have patiently waited for approval of their settlement with the Debtors, through months of empty promises,” the motion reads. “But the Debtors appear to have chosen to ignore their signed settlement with PLM and Aimia.”
As such, PLM is now asking for the Chapter 11 to approve the settlement and force the Mexican airline to fulfill it.
Stipulation contemplates USD 100m claim reinstatement option
The loyalty program considers that Aeromexico obtained the USD 100m financing through an “unlawful scheme,” hiding its imminent bankruptcy from PLM and AIMIA.
“PLM does not believe it is typical restructuring practice to procure financing on the literal eve of bankruptcy while concealing the imminent filing, and respectfully submits that such conduct is facially improper and exposes the Debtors to substantial litigation risk,” the loyalty program said in the motion. “In the absence of the Stipulation, PLM (and Aimia) intends to pursue every available source of recovery (which would capture an enormous share of the value potentially available to unsecured creditors), and assert all rights and defenses available under the Bankruptcy Code. Indeed, if the Stipulation is not approved, litigation between PLM and the Debtors will dominate the remainder of these Bankruptcy Cases.”
Aeromexico used the USD 100m from PLM to finance the first weeks of Chapter 11 proceeding, while the airline searched for debtor-in-possession (DIP) financing, thus saving it from a significant operational disruption or even a liquidation, according to the motion.
“Had the Prepetition Transactions not occurred, PLM would have been willing to provide DIP financing to the Debtors,” PLM’s lawyers argued.
Aeromexico received an initial USD 100m disbursement of tranche 1 of its Apollo Global Management-led DIP financing in early September. The company received the second disbursement, totaling USD 275m and consisting of the remaining USD 100m of tranche 1 and USD 175m of the USD 800m tranche 2, in early November. A third and final USD 625 disbursement was made in February of this year.
The stipulation that PML is seeking to enforce relieves Aeromexico from a substantial use of cash, as nearly USD 100m of claims arising from the pre-petition transactions can be reinstated in lieu of repayment in cash, according to the document. Additionally, PLM is waiving more than USD 7m in cure costs.
“These concessions by PLM reduce the Debtors’ need for exit financing and will facilitate the Debtors’ negotiation and confirmation of a reorganization plan,” PLM’s lawyers argued in the motion.
The stipulation also represents an “important step toward a successful reorganization” of Aeromexico, as the continued operation of the loyalty program is “critical” to the airline’s operations, they added.
Furthermore, Aeromexico’s indirect stake in PLM is one of its most valuable assets, and the stipulation preserves its value, according to the motion.
PLM’s lawyers also argued that, given the amount of information already provided to Aeromexico, if the airline returns to the negotiation table without the stipulation being enforced, any potential bid presented to PLM and AIMIA would be “materially inferior” to the deal included in the agreement.
“The consequences of permitting debtors to treat signed settlements as one-way options is obvious even from the facts of this Motion,” PLM’s lawyers noted. “Few creditors would agree to settlements with a debtor, knowing that the debtor could use the settlement against the creditor without the creditor receiving the benefits it bargained for.”
A hearing to discuss the motion has been scheduled for 21 May, with objections due by 14 May.
Along with the motion, PLM has also asked the Chapter 11 judge for permission to only file a redacted version of the loyalty program agreements, court documents show.
Judge sanctions labor agreements, aircraft leases
Aeromexico had scheduled a hearing for 21 April to discussed a proposed order on procedures for the assumption of executory contracts and unexpired leases and subleases, as well as to obtain a court sanctioning of new labor agreements recently signed with its main workers’ unions.
However, the hearing was cancelled the day before, as no objections were filed.
As a result, the Chapter 11 judge signed the respective orders today, according to court documents.
Aeromexico’s USD 400m 7% unsecured bonds due 2025 last traded 21 April at 54.25, according to MarketAxess.
by Pablo Dominguez

Debtwire's Restructuring Database: Aeromexico (access required)
Grupo Aeromexico Debtwire company page
Shareholder profile of Aeromexico’s Tricio family (Debtwire Latin America subscription required)
Credit Report on Latin American airlines (Debtwire Latin America subscription required)    

 
 
 
 
 
 
 
 
 

[wabuffo]

I agree that AIMIA and PLM appear to be in a strong position given that Aeromexico signed the stipulation, though I'm no legal expert.  I think some of the recent invoice detail from Aeromexico's advisors also appear to support that Aeromexico has resigned itself to assuming the contracts.  But we'll see how it all turns out.

However, I feel vindicated that my viewpoint about the original $100m loan and prepay negotiated by AIMIA with Aeromexico was a missed opportunity and sloppy negotiating by AIMIA and the Mittlemen.   Aeromexico was desperate and about to go into bankruptcy -- but AIMIA got nothing from the deal except empty promises that Aeromexico knew it was going to renege on within months and leave PLM an unsecured creditor in Chapter 11.

 

AIMIA's filing from yesterday basically admits it.

 

..and...

Its now obvious that the Mittlemen blundered in their first "deal" by rushing into a one-sided agreement with Aeromexico for which they extracted nothing in return for AIMIA shareholders.  You know the saying about poker games and patsies....

wabuffo

Edited April 23, 2021 by wabuffo

[Dr. Aybolit]

maybe so.  but had Aimia not spent the months prior to the filing getting PLM's contracts all renegotiated and extended, to AM's admitted satisfaction in signing the refined contracts on the eve of the chp. 11 filing, the old contracts could have been torn apart as being onerous legacy contracts that unnecessarily burden the estate and need to be redone.  that argument taken away in this case.  so maybe the better poker player outsmarted himself here?  anyway i am encouraged to see the increasing importance PLM is playing in all of this.  i think that bodes well.

[wabuffo]

M's admitted satisfaction in signing the refined contracts on the eve of the chp. 11 filing, the old contracts could have been torn apart as being onerous legacy contracts that unnecessarily burden the estate and need to be redone.  that argument taken away in this case. 

I doubt it.  Aeromexico's legal, financial and restructuring advisors (along with Apollo their DIP lender) took months and spent enormous amounts of man-hours looking at every possible option (rejecting the contracts, buying out AIMIA, assuming the contracts, restructuring PLM, etc) and then signed the stipulation and will assume the contracts.  That was never going to happen.  

But the reality is that nothing in the pre-Chapter 11 agreements that the Mittlemen "negotiated" protected AIMIA.  The only thing that protected AIMIA was Aeromexico's own self-interest through their 51% ownership in the the Trust that holds their PLM equity.

I'm not arguing that AIMIA's stake has no value or that Aeromexico could reject the contracts and walk away from hundreds of millions in equity value.  I'm just arguing that AIMIA got nothing for allowing Aeromexico to extract $100m and then pretended to the AIMIA investors that they got something of value.  

Anyway - I'll drop it now.  You are correct that the thing to focus on now is where does this Chapter 11 case go from here.

wabuffo

Edited April 23, 2021 by wabuffo

[wabuffo]

Things are heating up in the Aeromexico Ch. 11 case with respect to PLM (and Aimia).  A bunch of interesting filings were posted on the docket last night:

1) OBJECTIONS TO AIMIA's/MITTLEMEN FILING:

With an omnibus hearing coming up next week (that includes on its agenda, AIMIA's recent motion to force Aeromexico's assumption of the PLM contracts), the Debtors (along with Apollo and the Unsecured Creditors Committee (UCC)) came out swinging with their objections.  (Documents 1187-1191).  The gist of the thread is that in late December, PLM, Aimia and Aeromexico negotiated a stipulation that would have had Aeromexico assume all of the PLM contracts.  But instead of filing it with the Court and asking the Judge to approve it - the stipulation was yanked and basically eighty-sixed.   From the context of these pleadings, it was Apollo that forced rejection of the stipulation (supported by the unsecured creditor committee).   The PLM asset is certainly the most valuable asset that Aeromexico has and it appears Apollo has other plans for it.

from Apollo's filing:

from UCC's filing:

Obviously these are vague references ("treatment"; "alternative transactions") - but clearly, they want to retain option value.  But more than that, as I've posted upthread, since the beginning of January, enormous amounts of resources and dollars have been spent studying what to do about PLM in the context of Aeromexico's BK estate by very expensive lawyers and consultants.  This activity has really picked up in March with the new batch of invoice payment requests.  Let's go to that now.

2)  ALIXPARTNERS' MARCH BILLING INVOICE DETAIL:

When I look at the invoice details, I tend to focus on the two most important advisors to Aeromexico -- Davis Polk & Wardwell (Aeromex's main Ch. 11 legal advisor) and AlixPartners (Aeromex's restructuring consultant).  AlixPartners is particularly interesting as they bill the most (their invoices go on for hundreds of pages per month detailing their various billable hour activities).   Their invoice for the month of March came out Friday (Doc 1192) as well.  What I usually do is focus on finding any references to "PLM" in their pdf document.

Their invoice is broken out by major themes - of which, the longest section containing the most billable hours (close to $1m USD for the month!) was a section titled "Business Plan".  It looks like AlixPartners is working with all of the key stakeholders (Aeromex mgmt, Apollo, UCC, Rothschild financial advisors, Seabury Capital, etc) on an exit plan for Aeromexico.  Under that "Business Plan" section - let me list a sample of the activities that reference PLM:

3/9/21 - "...review of business plan assumptions for PLM transaction scenario"

3/17/21 - "integration of PLM financial projections into business plan"

3/31/21 - "...discuss PLM transaction impacts on business plan"

3/31/21 - "Perform review of PLM financial projections for transaction scenario impacts on business plan"

3/31/21 - "Review PLM report on growth opportunities to add to the Business Plan".

Interesting, no?  Does that sound to you like Aeromexico is just planning to assume the PLM contracts and exit Ch. 11 on a status quo basis with respect to PLM?

3)  REQUEST BY AEROMEXICO TO EMPLOY LEE GROUP:

The last filing (Doc 1193), and perhaps most interesting, on Friday night was a request to employ Kenneth Lee of the Lee Group.  Who is Kenneth Lee and the Lee Group, you ask?

This legal firm was already advising Aeromex - but in a minor role.  Due to bankruptcy rules set up to cover the Tier 1 firms that don't bill a lot, Lee was sort of under the radar.  From what I can tell, he is basically Aeromexico's go-to lawyer on all things PLM-related.   And in fact, when I query the billing details from AlixPartners and Davis Polk for "K. Lee", he ONLY appears in the context of a meeting or discussion about PLM.

So this filing bumps him to a major role with some big-ass billings coming.  Aeromexico is asking for the BK Judge to approve his soon-to-be upsized billings and role within the Ch. 11 case.   His title in the context of this motion?  "Special Airline Transaction Counsel".  The rest of the motion is deliberately vague - but one of his seven or so possible areas of responsibility is "commercial and financial agreements related to the participation of the Debtors in the Club Premier loyalty program".   But c'mon!   His only involvement has been PLM and now he's a "special airline transaction counsel"?

So what does this all mean?  Perhaps nothing?  But we have the Lee Group's expansion of responsibilities when they are the "PLM expert" within the context of Aeromexico's business planning for exiting Ch. 11.  That same business plan being crafted by AlixPartners of a "PLM transaction scenario" signals that Apollo stopped the stipulation in its tracks because they want to seriously consider a monetization of the asset value of PLM in the context of an Ch. 11 exit plan. 

What's perhaps a bit worrying, given Aimia and the Mittlemen's desperate and clumsy attempt to force the issue with their stipulation motion is that whatever is being cooked up with respect to PLM is not being done collaboratively with Aimia. That may signal that a very coercive take-it-or-leave it scorched earth policy designed by Apollo is coming.   Could it be a forced conversion of Aimia's PLM equity into post-reorg Aeromexico equity with perhaps a bit of cash to sweeten the deal?  I don't know.   But Aeromexico/Apollo are clearly aware that the capital markets are wide open to refinance PLM with debt for a one-time large cash-out to Aeromexico patterned after the United or Avianca deals.

Of course, I could be reading too much between the lines and be way off-base.

wabuffo

Edited May 15, 2021 by wabuffo

[wabuffo]

With an omnibus hearing coming up next week (that includes on its agenda, AIMIA's recent motion to force Aeromexico's assumption of the PLM contracts)

This hearing for tomorrow, or at least the portion dealing with AIMIA's motion to force Aeromex to assume the PLM contracts, has been pushed out to June 22nd according to this filing yesterday.

https://document.epiq11.com/document/getdocumentbycode/?docId=3947633&projectCode=AEM&source=DM

With the appointment of the Lee group, and all the work in the background by Aeromexico's advisors on PLM over the last few months, I wonder if this means that negotiations are getting serious between Aeromexico, PLM, and Aimia about some sort of a deal.   We'll see I guess.

wabuffo

[Homestead31]

thanks for the continued work here wabuff, but do you think it is possible that Aimia's bankruptcy lawyers actually know what they are doing here, and filed the Stipulation motion to force the issue on to the docket rather than just to force the issue? 

i know you love to hate on the mittlemans, but it seems unlikely it was Aimia that wanted to delay the hearing, which suggests it was Apollo that wanted to push the hearing.

by filing a motion related to the stipulation the issue was put under the court's nose so that at some date in the future Apollo can't claim that they didn't have time to deal with the issue or whatever and try to hold a gun to Aimia's head on a short time line.

again i appreciate your efforts here, but it seems like Aimia is playing chess, not checkers.

[wabuffo]

i know you love to hate on the mittlemans, but it seems unlikely it was Aimia that wanted to delay the hearing, which suggests it was Apollo that wanted to push the hearing.

I never said anything about Aimia wanting to delay the hearing.  I don't know who pushed it out - perhaps it was a joint decision because they are starting to negotiate about a resolution.

Look - I have a position in AIM now.   So I'm not a hater.

My bet is that Apollo is trying to extract complete ownership of PLM as part of the exit plan so that they can refinance it for a big cash infusion to Aeromexico.  The question is how will they do it?   My bet is that Aimia will have to accept a significant stake in Aeromexico equity/and or some cash as part of that deal.  Apollo and Aeromexico probably noticed Aimia's deal to exchange its BigLife equity stake for AirAsia common equity this quarter.

wabuffo

[wabuffo]

The first sets of billing for April are starting to come out.  This one from Aeromexico's Mexican legal counsel gives us some more threads to pull on.

https://document.epiq11.com/document/getdocumentsbydocket/?docketId=906280&projectCode=AEM&docketNumber=1226&source=DM

I found these snippets from the invoicing time sheets in the appendix to be particularly eye-brow raising:

Quote

4/21/21       Review of first amendment to PLM’s Shareholder Agreement to analyze possible post-closing obligations.

4/23/21       Review and analysis of non-binding PLM term sheet

4/28/21       …analysis of Aimia’s counterproposal to acquisition of PLM shares.  Discussion with Rothschild [Aeromexico's financing advisor] and Aeromexico in such regard.

 

Of course - it could be nothing...    In fact, I would note that Aimia's/Mittlemen's filings to force Aeromexico to assume the PLM contracts were around this time too (April 22).  Not sure how to interpret all of that - good sign or bad?

wabuffo

Edited May 21, 2021 by wabuffo

[Dr. Aybolit]

I have to say, wabuffo, you deserve whatever the COBF equivalent is of a Pulitzer Prize for your sleuthing on this.  In all of my years of investing, with more than a handful of bankruptcy situations, I never thought to look into the billing descriptions for such insights, and I am kinda amazed at how much they seem to reveal here.  So really, my hat is off to you in gratitude for all of this legwork and teaching this old dog a new researching trick.

To the matter at hand... I don't care who gets the credit or blame, Aimia's lawyers, bankers, the Mittlemen, or the Winklevii... but I will be really dismayed if Aimia doesn't extract something very close to the US$400M they agreed to with AM upon the contract extension / loan signing of June 2020.  The program seems to have performed very well during the worst decline in aviation history, generating FCF and dividends.  Hard to fathom a justification for accepting anything less than what both parties agreed to with eyes wide open during the height of the storm.  Aeromexico bonds soaring lately too, up over $80 now, from $55 a month ago, and $40 on 12/31/20.

anyway, i remain optimistic that fairness is attainable here.  I guess we shall soon see...

-Dr. Aybolit

[wabuffo]

So really, my hat is off to you in gratitude for all of this legwork and teaching this old dog a new researching trick.

Thanks!

wabuffo

[wabuffo]

The invoices continue to be a wealth of information.  Some of it is quite shocking in terms of disclosure.  There's more wild stuff this evening.  This time from the March invoices of the Mexican legal firm representing the unsecured creditors.

https://document.epiq11.com/document/getdocumentbycode/?docId=3950448&projectCode=AEM&source=DM

At first, I thought it was a typo, but then it appears again....

Ok - did I miss a memo or something?  A quick squint at Aeromexico's IR site's Executive Team page:

https://aeromexico.com/en-us/about-us/aeromexico-corporate/our-executive-team

Nope - he's still there.

Is this a slip-up?  I haven't seen anything in the invoice details from Aeromexico's advisors (legal or restructuring).  But on the other hand, they would've been sure to keep this embargoed.   If there was to be a fork-up, it's more likely that an advisor on the unsecured creditors's side would get lazy or sloppy.

Perhaps its a mistake - it does say "alleged" and this was a couple of months ago.  Since two months have passed without an announcement, I'm guessing it was a mistake.

On the other hand - perhaps the Aeromexico Ch. 11 isn't going well.   It would explain the sudden u-turn on the PLM stipulation with Aimia which was agreed to by this CEO and his execs -- but then torpedoed by Apollo.  It could also explain the change in direction in April in terms of how the Chapter 11 advisors were studying PLM as well as the sudden panic in late April by Aimia (and the Mittlemen).  Their filing now makes sense as a possible reaction to changes in leadership/direction on the Aeromexico side that led to probably a low-ball Apollo offer to buy them out. Thus, in reaction to all of this, AIMIA is pleading with the Court to enforce the original stipulation and force Aeromexico to assume all of the PLM financial and commercial contracts.

Oh - and there's also the recent news that the FAA has downgraded Mexico's air traffic control system to Category 2 which allows the status quo to continue but permits no new flights/routes to be added (it also means US airlines can't sell tickets on Mexican air carriers - Delta is Aeromexico's partner).  Category 2 puts Mexico on a footing with Pakistan and Bangladesh among other countries with similar FAA category 2 status.

https://aeromexico.com/cms/sites/default/files/ER_AM_CAT_2_25_MAY_2021-_clean_ENG.pdf

There's a lot here to process - but the clues are pointing to Apollo having grabbed the reins from the Aeromexico execs and the Ch. 11 process becoming much more adversarial and ruthless.

Of course, I could be wrong about all this.

wabuffo

Edited June 2, 2021 by wabuffo