MatlinPatterson Global Opportunities Partners stepped in with an equity investment as part of its debtor-in-possession financing for ATA Holdings Corp. The private equity firm is providing a $30 million DIP that will be converted into equity when ATA emerges from bankruptcy. It will provide an additional $70 million equity investment upon the airline's emergence with a commitment to provide an additional $20 million of exit debt financing. Pricing of the DIP loan was not disclosed.
"Matlin understood our needs," said Frank Conway, cfo of ATA. "They were willing to provide an interim DIP and a role in long-term equity. They ended up being an insightful and flexible group." MatlinPatterson's DIP replaces a $47 million DIP provided by Southwest Airlines, a creditor to ATA. Southwest agreed to provide the financing as well as a $30 million investment in ATA after the airline filed for bankruptcy last year. Conway said that the airline approached Southwest for additional financing in the summer, when fuel prices spiked after Hurricane Katrina. Southwest was unwilling to provide the additional financing and Matlin stepped in to take the place of Southwest as a DIP lender.
Conway said the airline conducted an exhaustive vetting process of potential DIP lenders, approaching more than 80 institutions, including traditional private equity firms and strategic investors. Jefferies acted as ATA's investment banker. Conway said MatlinPatterson's willingness to provide liquidity through an equity investment was what the airline was seeking. "In this capital intensive business, it is helpful to have the equity power on hand. The $120 million of financing gives us the equity and liquidity to go forward," said Conway.
Conway said pricing did not play a big role in the airline's choice to choose MatlinPatterson as a financing partner. The private equity firm's willingness to work with management's plan to emerge from bankruptcy was more important to the airline. "Pricing tends to be uniform. The challenge is to find an investor that supports the business plan," said Conway. As part of the reorganization plan, MatlinPatterson will be part of the board and will have input in the management of its operations. But Conway stressed that the responsibility of running the company would be left to ATA's management.