FIG Simplify Macro Strategy ETF

Delta Air Lines Inc.'s offer of $75 million to fund Republic Airways Holdings Inc.'s chapter 11 case has run into trouble with shareholders and the federal government, which complain the financing terms offer Delta extraordinary, and possibly illegal, protections.

In an objection filed Thursday, U.S. Attorney Preet Bharara said the financing terms would "impermissibly protect Delta," may be "unlawful" and should therefore be denied the bankruptcy court's approval.

Republic shareholders also urged the court to deny the financing, which in conjunction with a related settlement between Delta and Republic they say would give Delta "enormous power" in Republic's chapter 11 case. Through code-share agreements, Republic operates flights for Delta and other large carriers.

"Granting that power to Delta should not be considered lightly," the shareholders said in court papers filed Thursday.

As of Monday, court papers show the shareholder group included funds managed by Axar Capital Management, Fortress Investment Group LLC and Trishield Capital Management LLC.

The shareholders say better financing terms are available to Republic, including those of a rival bankruptcy loan they have offered to the company. Their loan is cheaper and gives the company more flexibility, the shareholders say, yet wasn't given the company's full consideration.

A Republic bankruptcy attorney couldn't immediately be reached for comment Friday.

Last month, Republic announced it had reached an agreement with Delta on the $75 million financing package as well as to settle Delta's lawsuit over the grounding of some of the flights Republic operated for Delta. The deal not only resolves the litigation but also preserves their code-share relationship, while allowing Republic to wind down its flying of the small jets that have fallen out of favor.

According to Republic, the financing and settlement deals are dependent upon each other, so failing to secure court approval for one deal would doom the other. In court papers, Republic says the deals will enhance its profitability and represent its "first major step forward" in achieving the business goals of its restructuring.

Stepping forward to urge the court to slow down the settlement and financing are the official committee representing Republic's unsecured creditors and the International Brotherhood of Teamsters union, which on Friday filed papers asking the U.S. Bankruptcy Court in Manhattan to push back next week's hearing on the deals.

The unsecured creditors say the Delta code-share deal could affect Republic's ability to negotiate similar deals with its other code-share partners, such as American Airlines Group Inc. and United Continental Holdings Inc.

Indianapolis-based Republic sought chapter 11 protection Feb. 25, blaming such challenges as a U.S. pilot shortage that have made it difficult to meet its obligations to its code-share partners.

Write to Jacqueline Palank at jacqueline.palank@wsj.com

(END) Dow Jones Newswires

April 15, 2016 14:35 ET (18:35 GMT)

Simplify Exchang (NYSE:FIG)
Historical Stock Chart
From Mar 2024 to Apr 2024

Simplify Exchang (NYSE:FIG)
Historical Stock Chart
From Apr 2023 to Apr 2024