DIP lenders to Spirit’s bankruptcy proceedings are mobilizing and educating themselves in response to the US government’s proposed bailout of the company should it prime the lenders in a post-bankruptcy capital stack, according to 9fin sources.
The existing plan could potentially subordinate the DIP lenders with the government’s $500m capital injection, resulting in the DIP lenders finding themselves junior to the government’s claim to Spirit’s assets.
While the government is no stranger to providing rescue financing to a company in bankruptcy, this would be the first time, to 9fin’s knowledge, that the government would be inserting itself into the bankruptcy in a prime position to existing DIP lenders, which include a subset of the pre-petition senior secured note holders advised by Akin.
Should that plan materialize, the DIP lenders are considering multiple options to challenge the government’s priming of their position, one source close to the matter said. Any proposed challenge would arrive with the end goal of ensuring the DIP lenders are either senior to the government’s claim or paid out at par, multiple sources added.
One of the avenues the DIP lenders are discussing would be by staking a constitutional challenge to the government’s proposal...
