ATA plan draws objection in connection with C8 Airlines' debt

By Caroline Salls

Pittsburgh, Jan. 23 - ATA Holdings Corp.'s plan of reorganization drew an objection from interested party NatTel, LLC based on its contention that the plan proponents and released parties imposed unnecessary debt on C8 Airlines, Inc. and stopped attempts to sell C8, according to Friday filings with the U.S. Bankruptcy Court for the Southern District of Indiana.

According to NatTel's objection, the plan is not confirmable because ATA, new investor MatlinPatterson and all of the plan-released parties:

• "are responsible for saddling the estate of C8 Airlines" with $481 million of pre-bankruptcy debt and $40 million of post-bankruptcy debt for which no value was received;

• owe C8 at least $15.6 million as determined by the Chapter 11 examiner;

• thwarted all post-bankruptcy attempts by NatTel to sell C8 as a going concern and thereby maximize C8's value for its creditors at an at least $4 million cost to its estate.

In addition, NatTel alleged that ATA, MatlinPatterson and the released parties siphoned off at least $22.6 million in net after-tax profits generated by C8 in 2003 and 2004 alone and caused C8 additional damages during the past six months in which "the plan proponents and the released parties have negotiated and pursued confirmation of the plan to further their own interests and line their own pockets at the expense and to the detriment of [C8] and its creditors."

NatTel requested that if the court overrules its objection, it should grant a stay of plan confirmation pending appeal.

ATA's plan confirmation hearing is scheduled for Monday.

ATA Holdings Corp., ATA Airlines' parent, filed for bankruptcy on Oct. 26, 2004. The Dulles, Va.-based company's Chapter 11 case number is 04-19866.

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