November 10, 2022 – The Court hearing the ExpressJet Airlines case issued an order approving sale of the Debtor’s inventory, consisting of Embraer ERJ 145 and E175 parts, tooling, and ground support equipment (the “Assets”) to JSX Holdings, LLC ("JSX" or the “Buyer”) at a purchase price of $9.0mn [Docket No. 242]. The Asset Purchase Agreement (the “APA”) is attached as Exhibit 1 to this order. JSX touts itself as a "hop-on jet service" and operates 24 Embraer ERJ-135 and ERJ-145 aircraft.
Case Background
On August 23rd, ExpressJet Airlines LLC** (d/b/a aha! Airlines, “ExpressJet” or the “Debtor”) filed for Chapter 11 protection noting estimated assets between $10.0mn and $50.0mn; and estimated liabilities between $10.0mn and $50.0mn. Although the Debtor was recertified to fly by the U.S. Department of Transportation (DOT) in the summer of 2021, it never recovered from the July 2020 decision of United Airlines “to withdraw all aircraft from the CPA, eliminating all ExpressJet’s revenues.”
** The Debtor is 100% owned by ManaAir LLC (“ManaAir”) and ManaAir is jointly owned by KAir Enterprises LLC and MNBS Associates LLC. In January 2019, ManaAir, then jointly-owned by KAir Enterprises and United Airlines, purchased ExpressJet from SkyWest, Inc.
On October 20th, the Debtor filed a motion seeking approval of a $9.0mn sale of substantially all its assets to JSX Holdings, LLC (the "Purchaser"). The Debtor anticipates the sale will close on or before November 18, 2022.
On October 24th, the Debtor filed an initial version of its Combined Plan of Reorganization or Liquidation and Disclosure Statement (the “Combined Document”) [Docket No. 198]; and further requested approval of a timetable culminating in a December 20th Plan confirmation hearing [Docket No. 200].
Sale Background
The Debtor's sale motion [Docket No. 192] notes, “As part of the Debtor’s efforts to maximize value for its estate and creditors through a sale of the Assets, promptly after filing for bankruptcy the Debtor consolidated its inventory in a single warehouse facility in Houston, Texas, and began working on a complete inventory listing. The Debtor’s management then developed a comprehensive list of potential purchasers for the Assets. Given the Debtor’s expertise in its industry and knowledge of the Assets, the Debtor proposed its management, led by the Debtor’s Director of Materials, Jamie McElvaney, market and sell the Assets. The Court agreed that the Debtor was in the best position to oversee the sale of the Assets in this chapter 11 case.
Following the status conference, the Debtor immediately launched its sale process, advertising the Assets in industry-specific publications and online parts marketplaces. The Debtor provided the RFP to approximately 125 interested parties. Sixteen interested parties submitted an intent to bid on or before the September 23 deadline. The Debtor then invited each party that submitted an intent to bid to view and inspect the Assets on-site—and nine sent teams to inspect the Assets. The Debtor also responded to due diligence requests from potential purchasers and allowed potential purchasers to examine the supporting paperwork that the Assets were maintained and properly recorded in compliance with FAA regulations.
Sixteen parties submitted a proposal by the September 30, 2022 deadline with one grace day. The Debtor also accepted a seventeenth proposal following the proposal deadline. The Debtor’s management evaluated each proposal and, where appropriate, engaged in arm’s-length, good faith negotiations with potential purchasers to improve upon their submitted proposal. The Debtor decided to actively short-list six proposals that were more beneficial to the Debtor’s estate and its creditors. For these six proposals, the Debtor evaluated each proposal using a weighted matrix system that considered, among other things, net value to the estate, potential risks associated with consummating the proposed sale (including an assessment of the bidder’s financial condition and references), satisfaction of all aspects of the RFP, and the specific Assets contemplated for purchase. On October 7, 2022, the Debtor selected the two bidders with the highest scores based on the matrix system as primary finalists and the bidders with the third and fourth highest scores as back-up finalists. Each of the finalists was provided an opportunity to refine their respective proposals. This process yielded several improvements from the short-listed finalists and a double-digit percentage increase in the ultimate purchase price for the Assets. After reviewing final proposals, the Debtor’s management determined that the Purchaser’s proposal was the highest and otherwise best proposal for the Assets.”
Key Terms of APA:
- Seller: ExpressJet Airlines LLC
- Buyer: JSX Holdings, LLC
- Purchase Price: $9.0mn
- Purchaser Assets: The Purchaser will purchase the Assets and certain Electronic Data associated with the Assets. The Assets comprises the Embraer ERJ145 and 175 parts and other parts, tooling and ground support equipment as described in the RFP.
- Break-Up Fee: The Debtor will pay Purchaser $500,000 (the “Break-Up Fee”) (in addition to refunding the Deposit) within six business days if the Debtor enters into a transaction with a different purchaser for the Assets, unless such other sale is pursuant to the Debtor’s right to rescind under the Term Sheet.
Prepetition Marketing Process
In June 2022, the Debtor engaged Raymond James Financial Inc. to market the Debtor’s business as a going concern to interested third-party investors. This marketing process included outreach to 350 parties, including 193 strategic and financial buyers and 157 lenders. Although the initial outreach generated interest in the business, by mid-July 2022, only one indication of interest was submitted and the Debtor was ultimately unable to identify a potential purchaser with sufficient capital to provide financing to the Debtor or to consummate a plan or acquisition. None of the remaining parties that conducted diligence regarding the potential purchase of the Debtor’s business or assets formally indicated their interest in a transaction.
About the Debtor
About aha!
aha! is a leisure brand of ExpressJet Airlines. aha! seeks to provide travelers in smaller communities, many who have seen air service reduced over the past decade through airline mergers, with convenient, short, nonstop flights to high-quality destinations like the Reno-Lake Tahoe region. In addition to offering value-priced, nonstop flights, aha! is partnering with resorts, casinos and attractions to "bundle" value-priced vacation packages. www.flyaha.com
aha!, short for air-hotel-adventure, flies from 11 exciting cities throughout California, Washington, Oregon, and Idaho. Among the destinations connected nonstop to Reno-Tahoe are: Bend/Redmond, Fresno/Yosemite, Ontario/Los Angeles, Palm Springs, Santa Rosa/Napa Valley, and Spokane. All routes are operated with 50-seat Embraer ERJ145 regional jets.
About ExpressJet Airlines
ExpressJet Airlines operates Embraer ERJ145 regional jet aircraft and has more than 40 years of regional airline experience. ExpressJet, including its leisure brand aha!, is focused on providing travelers in smaller communities with convenient, short, nonstop flights to high-quality destinations. The company's services also include specialty charter flights and additional future routes.
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