Frontier Airlines won preliminary permission from a bankruptcy court to borrow $30 million under an agreement with creditors to provide as much as $75 million to fund operations.
U.S. Bankruptcy Judge Robert Drain in New York approved the request to begin borrowing on the so-called debtor-in-possession loan over objections from labor unions at a hearing Tuesday.
“This DIP facility is important to Frontier’s very survival,” Frontier’s attorney, Marshall Huebner, told Drain.
The Denver-based airline said Monday it would pursue the $75 million loan from Republic Airways Holdings Inc., Credit Suisse Securities (USA) LLC and AQR Capital LLC. All the proposed lenders are members of the committee representing Frontier’s unsecured creditors.
Frontier received the new loan offer from the creditors after it struck a deal to sell six additional planes to Verulamium Finance Ltd., giving the company $67.3 million in additional cash to work with. Drain also approved the plane sales at Tuesday’s hearing.
“We’re pleased with the judge’s ruling and plan to move forward with our business plan,” Frontier spokesman Steve Snyder said.
A final hearing on the loan is scheduled for Sept. 15. It displaces another loan agreement announced last month tied to Perseus LLC’s buyout offer for the airline.
The creditors’ loan offer has a lower interest rate, fees and borrowing costs, and provides more total cash than the Perseus deal, Frontier said.
The loan Drain approved has terms that require Frontier to reach certain goals on concessions from workers by Nov. 15. The International Brotherhood of Teamsters and the Frontier Airlines Pilots Association objected to those terms.
Denver Post staff writer Greg Griffin contributed to this report.
