Western Global Airlines (WGA) has filed for voluntary protection under Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Company entered the process with a commitment for more than $77 million of debtor-in possession (DIP) financing from founder, Jim Neff and certain members of the Ad Hoc Group (includes bondholders holding more than 85% of the outstanding senior unsecured notes due in 2025) that will support the Company's operations through the Chapter 11 cases and provide WGA with a strong balance sheet after it has emerged to even better serve its customers.
The airline has reached an agreement with key financial stakeholders in support of a reorganization plan to stabilize the business and its financial future of the airline. This agreement ensures that WGA continues to operate without interruption and meets customer needs with safe, effective, on-time service delivery.
The agreement reached with the Ad Hoc Group is memorialized in a Restructuring Support Agreement (RSA) that includes the terms of a Chapter 11 plan of reorganization. Once the reorganization is implemented, it will materially reduce the Company's debt by over $450 million, infuse significant new capital into the Company, and give the reorganized WGA the ability to continue its commitment to sharing the economic benefits of ownership with employees.
The RSA achieves many of the goals WGA sought from the outset of its restructuring efforts, including deleveraging the balance sheet by 86% and partnering with new investors. Moreover, WGA's proposed partnership with the Plan Investors and the Ad Hoc Group is indicative of its strong and promising future. Additionally, it is the parties' intention to provide consideration to the Employee Stock Ownership Plan (ESOP).
Jim Neff, founder of WGA, on June 29, 2023 purchased $115 million of outstanding senior secured debt for $45 million in a competitive process independently conducted by the lenders. To further support the restructuring process under the terms of the proposed plan described in the RSA, Jim Neff has also agreed to forego some of the statutory rights that he would otherwise maintain as the holder of this debt and pass on the $70 million benefit to the other stakeholders, including the bondholders, the employees, and the ESOP, to provide greater consideration and value to them.
"As the Founder and CEO of Western Global Airlines, I have always understood the unique value proposition that WGA brings to the world as a reliable, responsive, and low-cost international air cargo provider," said Neff. "I am and always will be loyal to WGA and its employee team. As such, my number one priority is preserving the long-term viability and value of WGA and protecting our employees. All my objectives regarding the Company align with this overriding goal. The plan we have outlined in the RSA reflects my continued dedication to and belief in WGA, along with the overwhelming support of our key financial stakeholders. I am confident that this plan will tremendously strengthen our financial position and ensure a better future for WGA, our people, and our customers. As always, we have the utmost gratitude to our employees, loyal customer base, and industry partners for their enduring support and appreciate the continued collaboration with our largest financial stakeholders."