Register, or Login to view the article
June 6, 2019 – Further to Court ordered mediation efforts led by Judge David R. Jones, the Debtors have announced a settlement with their Official Committee of Unsecured Creditors (“the UCC”) and lender Thirty Two, LLC (the "Settlement" and the "Settling Parties," respectively) that “resolves all pending UCC objections and motions and will provide the basis for a consensual Plan of Reorganization.” A term sheet, summarized below, in respect of the Settlement has been filed with the Court [Docket No. 624]. Further to terms of the Settlement, the Settling Parties will push for a confirmation hearing at the end of July and emergence at the end of August.
In a press release announcing the settlement, the Debtors stated, “A hearing to approve the Disclosure Statement for PHI’s proposed amended Plan of Reorganization (‘the Plan’), which will allow PHI to solicit votes on a consensual plan, has been set for June 18, 2019. PHI expects that it will jointly file an amended and consensual Plan with the UCC prior to this hearing. The Company anticipates that, with the support of the UCC, it will be able to proceed expeditiously towards approval of the Plan. Accordingly, a hearing to confirm the proposed Plan is expected to be scheduled on July 30, 2019. Following that confirmation hearing, if the Court approves the Plan, PHI will consummate the transactions and emerge from Chapter 11.
The Agreement outlines that, if the Plan becomes effective, Al Gonsoulin will retire as the Chief Executive Officer and Chairman of the Board of PHI, and Lance Bospflug will become PHI’s Chief Executive Officer and will be named to the Company’s Board of Directors upon emergence. These management changes are pending the aforementioned approvals of the Company’s Disclosure Statement and Plan of Reorganization.
The Company expects to complete its Chapter 11 process within the previously announced timeline, aiming to emerge in late summer 2019. PHI remains confident that it will emerge with a significantly reduced and more sustainable debt structure, as well as sufficient liquidity, that will position the business for long-term success.”
Term Sheet Summary
The term sheet addresses, inter alia, the following issues agreed by the Settling Parties:
- Thirty Two Claim: The Thirty Two Claim shall be an allowed secured claim in the amount of $132,250,000, which amount includes any and all accrued interest, fees (including, without limitation, professional fees), and/or expenses, in each case whether or not already paid in connection with any order of the Bankruptcy Court (the "Allowed Thirty Two Claim”).
- Blue Torch Claim: The Blue Torch Claim, to the extent allowed, shall be refinanced or reinstated, and if not either refinanced or reinstated, then treated in a manner consistent with the Bankruptcy Code as agreed by the Debtors and the Official Committee.
- GUC Claims: To ensure that the Consensual Plan meets the requirements of section 1129 of the Bankruptcy Code, the Debtors and the Official Committee shall jointly determine the appropriate classification for the Unsecured Notes Claims, Aircraft Lessor Claims, and General Unsecured Claims (collectively, the “GUC Claims”). Allowed GUC Claims shall receive their Pro Rata share of the New Common Stock Distribution (which will represent 100% of the New Common Stock subject to dilution only for (i) any rights offering, if any, and (ii) the MIP (as defined herein)).
- Board of Directors: The initial directors of the New Board shall consist of seven (7) directors as set forth below:
- Six (6) of the directors shall be selected by the Official Committee, provided, that two (2) of the six (6) directors shall be (i) independent directors with requisite industry experience, and (ii) selected by the Official Committee in consultation with Lance Bospflug, who shall have a veto right with respect to one (1) of such two (2) directors; and
- One (1) director shall be Lance Bospflug, who shall be named the reorganized Debtors’ chief executive officer upon the Effective Date.
- Management Incentive Plan: Up to 10% of the New Common Stock shall be reserved for a management incentive plan (the “MIP”), with the form, terms, allocation, and vesting to be determined by the New Board; provided, that the Debtors shall promptly retain Harvey L. Benenson from Lyons, Benenson & Company, Inc. to assist the Official Committee in determining an initial percentage of the MIP (and no other terms and conditions), which will be identified in the plan supplement and will be allocated by the New Board within sixty (60) days following the Plan Effective Date.
- Releases & Exculpation: The Consensual Plan and Confirmation Order will contain customary mutual releases and exculpation provisions, including, without limitation, releases (to the fullest extent permitted by law) of all of the Debtors’ officers, directors, employees and advisors, as well as mutual releases by and among the Debtors, the Official Committee, Thirty Two, LLC, and Mr. Gonsoulin (as defined below). In addition, each member of the Committee (other than Delaware Trust, in its capacity as indenture trustee) shall agree not to exercise its right to “opt-out” of the third party releases set forth in the Consensual Plan; provided, that any such agreement to be bound and not to “opt-out” shall be immediately and automatically without further action of any Consenting Mediation Party revoked and changed to be “opt-out” in the event that the Consensual Plan has been amended, modified, or supplemented in a manner inconsistent with this Term Sheet (absent the consent of all other Consenting Mediation Parties) or this Term Sheet is no longer in effect. For the avoidance of doubt and without limitation, as part of the mutual releases to be included in the Consensual Plan,
- Mr. Al A. Gonsoulin (“Mr. Gonsoulin”), Thirty Two, LLC, and each of their respective members and/or affiliates shall release, in any and all of their capacities as it relates to the Debtors or the non- Debtor affiliates, including, without limitation, as employee, director, officer, creditor, and/or stockholder, all claims, rights, and entitlements under contract, law, equity, or otherwise, they may have against the Debtors, the non-Debtor affiliates, reorganized Debtors, Official Committee, and any of such parties’ respective members and/or affiliates in their capacities as such (and such parties’ respective directors, officers, and employees).
- The Official Committee, the Debtors, the non-Debtor affiliates and reorganized Debtors and their respective members and/or affiliates shall release all claims, rights, and entitlements under contract, law, equity, or otherwise, they may have against Mr. Gonsoulin or Thirty Two, LLC and any and all affiliates thereof, in any and all of his and their capacities as it relates to the Debtors, the non-Debtor affiliates, the reorganized Debtors and the Official Committee including, without limitation, as employee, director, officer, creditor, and/or stockholder (and such parties’ respective directors, officers, and employees).
- Outside Closing Date: The Consenting Mediation Parties agree that, unless otherwise waived in writing by each of the Consenting Mediation Parties, failure to close the Transaction by September 30, 2019 (which can be extended by mutual agreement and shall be automatically extended to the extent the Plan Effective Date has not occurred solely as result of a delay in obtaining necessary governmental approvals) shall result in immediate termination of the Transaction and this Term Sheet. Agreed dates anticipate a confirmation hearing at the end of July and emergence at the end of August.
- Mr. Gonsoulin – Cooperation: Mr. Gonsoulin (i) shall support the Transaction, act in good faith, and take any action reasonably requested by the Debtors and the Official Committee to effectuate the Transaction in a Mr. Gonsoulin (i) shall support the Transaction, act in good faith, and take any action reasonably requested by the Debtors and the Official Committee to effectuate the Transaction in a timely manner and (ii) shall not (a) object to, delay, impede, or take any other action to interfere with, delay, or postpone acceptance, consummation, or implementation of the Consensual Plan, (b) propose, file, support, or vote for any restructuring for the Debtors other than the Consensual Plan, (c) take any action to encourage any other person or entity to take any action, directly or indirectly, that would reasonably be expected to, breach or be inconsistent with this Term Sheet, or (d) take any other action, directly or indirectly, that would reasonably be expected to interfere with the acceptance, consummation, or implementation of the Transaction or the Consensual Plan.
Mr. Gonsoulin shall enter into a three year (or such shorter time to the extent required by applicable law) non-solicit (with respect to customers, vendors, lessors, and employees of the Debtors and their non-Debtor affiliates) and non-disparagement agreement with the Debtors and/or reorganized Debtors, as applicable (the “Non-Solicit and Non-Disparagement Agreement”) on customary, industry standard, terms reasonably acceptable to Mr. Gonsoulin, the Official Committee, and the Debtors or the Reorganized Debtors, as applicable.
- Mr. Gonsoulin – Retirement: As of the Plan Effective Date, Mr. Gonsoulin shall retire as the chief executive officer and chairman of the board. If requested by the New Board or the reorganized Debtors’ Chief Executive Officer, Mr. Gonsoulin agrees to respond to reasonable inquiries and otherwise reasonably assist the reorganized Debtors on a limited basis. Mr. Gonsoulin may use his current office, located in Sugar Land, Texas, through December 31, 2019 and may use his existing assistant as reasonably necessary; provided, that, any such use of his current office and existing assistant is consistent with this Term Sheet and the Non-Solicit and Non-Disparagement Agreement. The Debtors or the reorganized Debtors, as applicable, will pay for the cost of maintaining Mr. Gonsoulin’s current company-provided medical coverage for Mr. Gonsoulin and his spouse through December 31, 2019.
No other payments or distributions are required to be made to Mr. Gonsoulin or any other party in connection with Mr. Gonsoulin’s retirement.
- Houlihan Lokey Fees: Within five (5) business days following the filing of this Term Sheet with the Bankruptcy Court, the Official Committee shall file a motion to abate its appeal of the order approving Houlihan Lokey’s retention (the “Houlihan Order”) (holding all deadlines in stasis) until the Plan Effective Date of the Consensual Plan. On the Plan Effective Date, the Official Committee will dismiss with prejudice its appeal of the Houlihan Order.
Provided (i) the Consensual Plan goes effective, (ii) the Official Committee, its members (other than Delaware Trust, in its capacity as indenture trustee), and any Commitment Parties (other than Thirty Two LLC, if applicable) support Houlihan Lokey’s final fee application and payment of its Recapitalization Fee thereunder, and (iii) Delaware Trust, in its capacity as indenture trustee, does not object to Houlihan Lokey’s final fee application and payment of its Recapitalization Fee thereunder, then (iv) Houlihan Lokey will waive any right it has to increase its Recapitalization Transaction Fee by 15% as set forth in the Houlihan Lokey Engagement Agreement.
The Official Committee has requested that Houlihan Lokey not serve as the Debtors’ agent in procuring a Financing Transaction under the Houlihan Lokey Engagement Agreement (including, without limitation, any Effective Date Funded Debt or Rights Offering) and Houlihan Lokey has agreed not to procure such Financing Transaction and to a carve out from its exclusive agency under paragraph 2 of the Houlihan Lokey Engagement Agreement to relieve the Debtors of such exclusivity obligation with respect to a Financing Transaction. Consequently, Houlihan Lokey shall not receive a Financing Transaction Fee; provided, however, if for any reason the Debtors and the Official Committee jointly request in writing that Houlihan Lokey assist with respect to any such Financing Transaction, and clearly indicate in such writing that they jointly intend for Houlihan Lokey to earn a Financing Transaction Fee, Houlihan Lokey shall be compensated as set forth in the Houlihan Lokey Engagement Agreement or as otherwise agreed to among the Debtors, Houlihan Lokey, and the Official Committee.
Read more Bankruptcy News