By Katy Stech Of DOW JONES DAILY BANKRUPTCY REVIEW
A lender that had challenged Gulfstream International Group Inc.'s (GIGIQ) bankruptcy sale has struck a deal with the Florida airline operator and its unsecured creditors, allowing the approximately $30 million deal to move forward.
The proposed settlement between the groups puts $175,000 of Gulfstream's estate toward SAH-VUL Strategic Partners I LLC, or SVSP, which agreed to lend Gulfstream $1.5 million just a few weeks before it filed for Chapter 11 bankruptcy protection in November.
SVSP officials had raised concerns that the bankruptcy auction wasn't competitive and later challenged the sale's approval, delaying the final transaction.
But SVSP's own claim faced uncertainty after unsecured creditors threatened to challenge lenders that had secured claims against Gulfstream.
"Simply put, [SVSP seeks] finality and to 'buy peace' from contribution and other claims that may be asserted based on the same facts and transactions," the groups involved with the settlement said Tuesday in papers filed with the U.S. Bankruptcy Court in Fort Lauderdale, Fla.
Gulfstream International Group, the publicly traded parent company of Gulfstream International Airlines, filed for bankruptcy on Nov. 4 in need of cash and a balance sheet overhaul. The company operates a fleet of 19-passenger propeller planes, offering flights that generally connect smaller towns to larger airports.
The company held an auction for its assets in early January. A Florida judge approved the auction's winning bid--a roughly $30 million offer from Victory Park Capital Advisors--but noted that the dispute with SVSP officials remained unsettled.
The proposed settlement gives SVSP a portion of its own claim, which amounts to nearly $1.6 million by its own estimate. That money stems from a September loan agreement that was secured by Gulfstream "personal and fixture property of every kind and nature."
But SVSP's secured claim was at risk of being downgraded. Representatives behind Gulfstream's committee of unsecured creditors said at the company's January sale hearing that they intended to challenge the liens and standing of existing noteholders.
SVSP stood to recover far less money if the claim was put in a pool with other unsecured creditors.
In Tuesday's court filings, the groups encouraged the court to approve the settlement, saying it was the easiest way to settle a dispute among groups who each felt they had winning arguments.
"Regardless of who ultimately prevails in the [sale order appeal], both disputes involve complex legal and factual issues in a case that requires expeditious resolution so that the sale may be consummated, the [company's] operations preserved, along with nearly 600 jobs, and creditors paid," they said in court filings.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)
-Katy Stech, Dow Jones Daily Bankruptcy Review; 202-862-1344; katherine.stech@dowjones.com
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