Mesa Air Group emerges from Chapter 11 bankruptcy as private company

By Caroline Salls

Pittsburgh, March 1 - Mesa Air Group, Inc. emerged from Chapter 11 bankruptcy when its plan of reorganization took effect on Tuesday, according to a company news release.

Mesa said it is well positioned to compete aggressively in the regional aviation industry, having shed inefficient aircraft and significant debt and extended its partnership with US Airways.

"Today marks a new beginning for Mesa, one that allows the company to build on its almost 30-year history and reestablish ourselves as one of the world's leading regional airlines," chairman and chief executive officer Jonathan Ornstein said in the release.

According to the release, Mesa emerged as a private company that will issue four new series of notes, shares of common stock and/or warrant to purchase shares of common stock to creditors in exchange for their claims.

During its restructuring, the company said it eliminated 100 excess aircraft and associated leases, which contributed to the deleveraging of Mesa's balance sheet in the amount of $700 million in capitalized leases and $50 million of debt.

The company also extended the term of its code-share agreement with US Airways through September 2015.

"In addition, through the restructuring process Mesa is among the first regional airlines to address the risks associated with 50-seat regional jet aircraft which have increasingly fallen out of favor with mainline carriers," Ornstein said in the release.

"We believe the elimination of exposure related to this fleet provides Mesa with a significant competitive advantage."

As previously reported, the company's chapter plan calls for the reorganization of Mesa through the issuance of new common stock by the ultimate corporate parent, which will be reorganized Mesa Air Group, as well as the issuance of new 8% notes in two series and a five-year $6.8 million U.S. Air note issued by reorganized Mesa Air Group.

Also, U.S. Airways will receive roughly 10% of the new common stock in consideration of its code-share amendment.

Creditor treatment

Treatment of creditors will include:

• Holders of administrative claims, priority tax claims and priority non-tax claims will be paid in full;

• Holders of secured claims will either receive a cash payment, receive the collateral securing their claims or have their claims rendered unimpaired;

• Holders of general unsecured claims who are U.S. citizens will receive a share of the new common stock and the new 8% notes;

• Holders of general unsecured claims who are not U.S. citizens will receive warrants and new series B 8% notes;

• Holders of 510(a) subrogation claims will receive a share of new restructured unsecured equity and series B 8% notes;

• 2012 noteholders will receive a share of new series A 8% notes; and

• Interest holders will receive no distribution.

New board members

Ornstein said the new members of the reorganized company's board of directors include retired LSG/Sky Chefs Onex Food Services, Inc. chairman Daniel J. Altobello; ENA Advisors, LLC's Ellen N. Artist; Morpheus Capital Advisors president Mitchell I. Gordon; DJL Advisors, LLC's Dana J. Lockhart; Odyssey Capital Group president Grant Lyon; Harvey W. Schiller, vice chairman and president of the Sports, Media, and Entertainment Practice of Diversified Search Odgers Berndtson; Dahlman Rose & Co.' managing director and head of transportation investment banking Mark J. Schulte; and Leadership Communications and Training LLC president Don Skiados,

Mesa's retiring board members include Richard R. Thayer, Carlos E. Bonilla, Joseph L. Manson, Maurice A. Parker, Peter F. Nostrand and Robert Beleson, Ornstein said in the release.

Mesa Air, a Phoenix-based provider of passenger and airfreight services, filed for bankruptcy on Jan. 5, 2010 in the U.S. Bankruptcy Court for the Southern District of New York. The Chapter 11 case number is 10-10018.

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