Commavia From United States of America, joined Apr 2005, 10190 posts, RR: 62 Reply 7, posted (4 years 10 months 3 weeks 5 hours ago) and read 8699 times:
DIP = Debtor-In-Possession financing.
Basically, its the cash some external party (usually a bank or other large financial institution) gives a company operating in Chapter 11 bankruptcy in order to keep them operating through the bankruptcy proceedings.
MKE22 From United States of America, joined Nov 2007, 1111 posts, RR: 2 Reply 8, posted (4 years 10 months 3 weeks 4 hours ago) and read 8654 times:
Quoting Commavia (Reply 7): Basically, its the cash some external party (usually a bank or other large financial institution) gives a company operating in Chapter 11 bankruptcy in order to keep them operating through the bankruptcy proceedings.
Without DIP, the bankrupt firm is no more.
So... they are asking for a cash handout like VX basically? Obviously with no more cash, no more F9. Every airline is hurting right now, maybe with the exception of G4 and WN.
LAXintl From United States of America, joined May 2000, 22030 posts, RR: 51 Reply 9, posted (4 years 10 months 3 weeks 4 hours ago) and read 8603 times:
Here is a well explained definition.
Debtor-In-Possession (DIP) financing is offered to companies in business bankruptcy for the purpose of bankruptcy financing. In most cases, DIP financing is considered attractive because it is done only under order of the Bankruptcy Court, which is empowered by the Bankruptcy Code.
Debtor-in-Possesion financing can also provide corporate bankruptcy financing to engage in a prepackaged business bankruptcy where the asset based lender providing DIP financing supplies the funds to work out a settlement with creditors up front, in order to walk into corporate bankruptcy court with this prepacked settlement. An asset based lender providing Debtor-In-Possession financing following the filing of either a voluntary or involuntary corporate bankruptcy proceeding utilizes the same fundamental asset valuation approach to provide the loan as it would utilize for a company not in business bankruptcy.
The availability of DIP financing may depend on the perceived viability of the company during the proceeding and on its ability to successfully complete a Plan of Reorganization (POR). The Plan of Reorganization must specify how the debtor intends to pay the creditors and Debtor-in-Possession financing is a means toward that end.
Potential DIP uses;
Bankruptcy Financing: Voluntary or Involuntary Bankruptcy
Plan of Reorganization
From the desert to the sea, to all of Southern California
Commavia From United States of America, joined Apr 2005, 10190 posts, RR: 62 Reply 10, posted (4 years 10 months 3 weeks 4 hours ago) and read 8597 times:
Quoting MKE22 (Reply 8): So... they are asking for a cash handout like VX basically?
The one key difference is that Virgin is still, technically, a going concern, meaning that it is solvent and is not under the supervision and protection of a bankruptcy court. Thus, it is seeking to access the capital markets for financing to operate.
In the case of Frontier, the company is no longer solvent, and instead is operating under the protection of a bankruptcy judge. This means that the company is protected from creditors and vendors making unilateral acts of self-protection, like repossessing assets, etc., but it also means that they have basically no ability to freely access the open capital markets, and thus must have DIP financing in order to continue to operate.
Quoting MKE22 (Reply 8): Obviously with no more cash, no more F9.
In these times, pretty much the only number that matters is cash in the bank. If a public company is a body, cash is like the blood: lose the blood, the body dies.
Profit and loss are paper numbers and the result of accounting calculations. They are useful tools in assessing a company's financial condition and drawing conclusions about, and comparisons between, peer companies.
However, cash is the only number that involves virtually no estimation, no assumption, no rounding of anything. It is simple and straightforward, and in the long-run, profits and losses do not determine if a company survives - cash does.
Quoting MKE22 (Reply 8): Every airline is hurting right now, maybe with the exception of G4 and WN.
Everyone is feeling it - including Allegiant and Southwest.
Some - for a variety of reasons - are feeling it more or less than others, and fairing better or worse, but most definitely everyone is feeling it.
I think you mean will Frontier be able to get DIP Financing? They already are a Debtor in Possession. Any individual or corporation that operates their business during their bankruptcy is a debtor in possession.
DIP Financing is the lending of money to an individual or corporation while in bankruptcy. But the availability of DIP financing to F9 or any other chapter 11 petitioner for that matter depends on the perceived viability of the company during the proceeding and on its ability to successfully complete a Plan of Reorganization (POR). So the fact that F9 was not able to line up DIP Financing is a red flag. But I'm not aware of their cash position, so it's possible (but highly unlikely) they didn't need DIP Financing. Also DIP Financing is done with the order of the court only.
Will F9 get DIP Financing? Probably not.
Cloudy From , joined Dec 1969, posts, RR: Reply 15, posted (4 years 10 months 3 weeks ago) and read 8268 times:
Quoting OPNLguy (Reply 5): Sure there is---we need to figure out whether it was SWA starting/expanding DEN service, or the skyrocketing cost of fuel, or the competency of management that is the cause of their woes... Yeah sure
I did not ask about any of the above. I don't propose yet another discussion of what got Frontier into this mess and I thought that was clear from the thread starter.
If the other threads were not dominated by the issues you mentioned, I would not have started this one. I just want a focused discussion about the short term financial situation. Specifically, I would like to know from more informed minds whether Frontier is likely to get DIP, and how critical it is that they get it. That's all. From what I have seen, that specific issue has gotten only passing mention in other threads. The other threads cover Frontier's long term woes well, but they don't do a good job in discussing Frontier's short term financial situation.
Another way of putting it.....we have spent a lot of time arguing how the patient got into the hospital. That has been interesting, but I would like to see some discussion about his chances for getting the transplant he needs, whether he can survive without it, and whether getting it insures his survival.
I don't start threads lightly. If you don't like it, report it to the mods(who I think will agree with me), or just don't participate in it.
LAXintl From United States of America, joined May 2000, 22030 posts, RR: 51 Reply 19, posted (4 years 10 months 3 weeks ago) and read 8186 times:
Well, knowing folks in the finance business I'm aware Frontier has been actively knocking on doors since about their second week in Ch11 in attempts to line up DIP financing.
I suppose one could make good arguments both for and against F9s ability to secure such financing, but personally baring a major disaster I think they will manage to line something up with either an outside lender, or from one or more of their current assets lenders like Airbus.
A more interesting, and critical item in my opinion is under what terms such financing is provided, and how that shapes or restricts the future of the airline.
For the hell of it, here are some major points that will play into any lenders decision.
-Future business plan viability. Currently F9 loosing $15-20mil a month is not something sustainable. I'm not sure Menke and company have yet been able to conceptualize a model that is workable in the long run. Current management focus is more the trauma doctor role, trying to stabilize the patient. They must eventually focus on the long term road.
-What can a DIP lender use to guarantee their investment? With Frontier continuing to burn the furniture in the form of aircraft sales, potential collateral equity is diminishing fast.
-Frontier position in the larger market place, and its brand. While well know to many on A.net and in the Denver region and adored by those, F9 in many ways has identity awareness problem particularly when it comes to NY financiers and Wall Street. Its far from a darling company to many such key folks. While a business decision, it greatly helps if the lenders have their hearts in it, and feel positively about the creditor.
-Other business factors involving the creditor, plus larger themes like overall global economy.
While cold, I've seen large lenders in the past basically put the trauma patient to sleep for good in order to play a chess game with their investments someplace else. For instance I've seen a large aircraft lender be willing to pull the rug out from underneath a carrier as they could very easily turn around and place the assets with someone else with lower risk and higher returns.
From the desert to the sea, to all of Southern California
EA CO AS From United States of America, joined Nov 2001, 12559 posts, RR: 64 Reply 20, posted (4 years 10 months 2 weeks 6 days 21 hours ago) and read 7991 times:
Quoting LAXintl (Reply 19): I think they will manage to line something up with either an outside lender, or from one or more of their current assets lenders like Airbus.
In the past, Airbus would have been a good candidate, especially since they'd obviously want to help a good customer if they can.
However, considering that many of their customers - and Boeing's as well - are deferring or considering cancelling orders outright, odds are they won't be as likely to prop up a failing customer as they would have a year or two ago.
"In this present crisis, government is not the solution to our problem - government IS the problem." - Ronald Reagan
SPREE34 From United States of America, joined Jun 2004, 2095 posts, RR: 10 Reply 21, posted (4 years 10 months 2 weeks 6 days 12 hours ago) and read 6277 times:
Quoting OPNLguy (Reply 5): we need to figure out whether it was SWA starting/expanding DEN service,
Obviously, obliterating Wright and not forcing WN to DFW to compete on a fair playing field permitted WN to move into DEN and change the whole tectonic action in the region. This tectonic change will result in the airport moving closer to downtown. That Frontier did not buy fuel hedges..........................
I don't understand everything I don't know about this.
AK From United States of America, joined May 2006, 58 posts, RR: 0 Reply 22, posted (4 years 10 months 2 weeks 6 days 9 hours ago) and read 5541 times:
Quoting SPREE34 (Reply 21): Obviously, obliterating Wright and not forcing WN to DFW to compete on a fair playing field permitted WN to move into DEN and change the whole tectonic action in the region. This tectonic change will result in the airport moving closer to downtown. That Frontier did not buy fuel hedges..........................
Spree34, you obviously missed the point of his comment.
Quoting OPNLguy (Reply 5): (and for the sarcasm-impaired, that's already been hashed and re-hashed on the existing threads...)
F9Animal From United States of America, joined Dec 2004, 4732 posts, RR: 30 Reply 23, posted (4 years 10 months 2 weeks 6 days 8 hours ago) and read 5348 times:
The question now is, can F9 get DIP? Yes. There are still plenty of investors that would be willing to invest into F9. The next question of course would be, is it worth investing? You better believe it. The airline, the product, and the customer base is enough in itself. F9 would be a heck of an investment, especially knowing that the price of fuel will eventually crash.
Before I get into the questions of "what makes you think fuel will crash", feel free to google.
OOer From United States of America, joined Oct 2005, 1395 posts, RR: 2 Reply 24, posted (4 years 10 months 2 weeks 6 days 8 hours ago) and read 5266 times:
Everyone seems to have Mesa for starting Hawaii ops and undercutting Aloha to the point of them shutting down their operation, yet people aren't nearly as upset with WN undercutting F9 in DEN to the point where they are in Ch. 11 and might cease operations soon....why is that???
25 LAXintl: I'd like to know what in F9, the product and its customer base as you refer to that is worth investing(risking) hundreds of millions potentially in?
26 RedFlyer: I don't think anyone, even the biggest pessimist, doubts the price of oil will come down dramatically. The key issue is WHEN? Obviously, if it happen
27 Ytib: Comparing two different items here. When Mesa stepped into Hawaii they did so with information not readily available. This was shown during the lawsu
28 EA CO AS: Oh gosh, I don't know - maybe because no one has ever intercepted an e-mail from WN executives saying they should "give F9 the final push" into liqui
29 Eghansen: OK. Here is the lowdown for those of you who don't actually know why F9 went into bankruptcy and what their options are. Normally, when you charge an
30 RedFlyer: [emphasis added] My personal opinion is that F9 was not forced to do anything, but was looking for an excuse to file BK. The credit card processor wa
31 LAXintl: 50/50 is far from the norm. Many airlines still have zero hold backs, and gain the full revenue at time of booking. This has been a question asked at
32 SPREE34: Ugh, no. Somebody missed something, but it wasn't OPNL or myself.
33 Enilria: They don't have to get DIP, but if they can't get DIP they will have an even harder time getting exit financing. In essence the inability to easily g
34 Drgmobile: While this already is being discussed in another forum, it is worth noting that in its most recent 10K filing with the SEC, the carrier disclosed it i
35 MasseyBrown: If the court approves (and bankruptcy courts usually do approve) Frontier can probably get DIP financing. The court will generally approve it unless r
36 Rbgso: Removing all emotion from this situation, the main questions are: 1) What unencumbered assets does F9 have that could be used to secure financing? 2)
37 Drgmobile: DIP financing isn't essential to a successful Chap 11 discharge. IIRC, Hawaiian never used a DIP loan - of course their recent bankruptcy was more lik
38 Eghansen: I suspect that you are right. Many people who write about airline bankruptcy seem to believe that filing for bankruptcy means that he airline (or any
39 Drgmobile: The reason you file for bankruptcy if you have plenty of cash is to keep the creditors hands off your cash. The number one reason for filing for bankr
40 MasseyBrown: Right, I mentioned HA only to illustrate that obtaining DIP financing doesn't have to be an essential part of Chap 11. F9 probably didn't need DIP lo
41 Drgmobile: F9 probably didn't need DIP loans when they declared either, although their circumstances may be different by now. Initially yes, but they said off t
42 Enilria: They have repeatedly said they need DIP financing. When they asked employees for wage concessions recently, they specifically stated that it was a nec
43 MasseyBrown: Has Frontier's most recent monthly statement (for May filed on June 30th?) been discussed in another thread? I don't want to replow the ground; but t
44 LAXintl: Yes. Long discussions http://www.airliners.net/aviation-fo...eneral_aviation/read.main/4048853/
45 Rampart: ... Way to remove all emotion, Rbgso. You didn't get any answers to your questions, but it looks like you aren't really asking since you have a concl
46 Avek00: With all due respect, I think you're somewhat uncealr as to how large corporate bankruptcies work. With very few exceptions, a BK filing by a large c
47 Mariner: I'm sure you have more information than I, but it was my understanding that the seven aircraft leaving the fleet are leased aircraft, in which there
48 XJETFlyer: Frontier is in bad shape at the wrong time. Not many if any will be investing in a sinking airline with fuel prices where they are. I see Frontier nos
49 LAXintl: Hi Mariner, Well if some one can come up with the 7 tail numbers involved that would be easy to figure out, however from my understanding is that Fro
50 Mariner: Interesting, thanks. I had understood the arrangement was with the lessors. CFO Tate always called them the piggy bank. mariner
51 LAXintl: which they are indeed. Only question really is how much value can they unlock in each between the aircraft original finance price, current market res
52 Mariner: I would guess the Creditors Committee is fully aware of this. mariner
53 RedFlyer: Hi Avek00, I don't disagree with anything you've said above and I think what you describe is precisely what happened. My only "bone" is with the way
54 MasseyBrown: Now that I've read the thread that LAXintl suggested, I see what the comments mean about repeating the same stuff over and over. On the whole, I think
55 Avek00: Frontier management might well be right that the First Data holdback was the near-term event that triggered the BK filing. Menke may be equally corre
56 N7371f: To respond to whether F9 is ridding itself of owned or leased A318/319's... I believe it involves selling aircraft. I'm basing this off the most recen
57 Enilria: First, new business. The June numbers are out and they are VERY bad. RASM was up a meager 2%, but haul fell 2.8%. Basically a shorter haul automatical