UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

Transcription

1 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION In re: ) Chapter 11 ) ATA HOLDINGS CORP., and ) Case Nos and CHICAGO EXPRESS AIRLINES, INC., ) (Jointly Administered) ) Debtors. ) ) LIMITED OBJECTION OF CREDITOR NATTEL, LLC TO DEBTORS MOTION TO EXTEND EXCLUSIVITY PERIOD NatTel, LLC ( NatTel ), a creditor and party-in-interest of debtor Chicago Express Airlines, Inc. ( Chicago Express ), hereby objects to the Motion to Extend Debtors Exclusive Period to File a Plan of Reorganization ( Motion ) filed by the above-referenced debtors (the Debtors ) as it relates to Chicago Express, and states: The Requested Relief Is Premature 1. NatTel has repeatedly observed in this case that the relationship between Chicago Express and the other Debtors (the Non-Chicago Express Debtors ) appears fraught with questionable financial and other dealings beginning when debtor ATA Holdings Corp. ( ATA Holdings ) acquired Chicago Express in 1999 and continuing to the present day. These questionable dealings, which are detailed in NatTel s Motion for the Appointment of an Examiner (the Examiner Motion ), 1 suggest that the interests of Chicago Express and the Non-Chicago Express Debtors are irreconcilably conflicted and, thus, that the Non-Chicago Express Debtors (and their principals and professionals) have not exercised their fiduciary duties owed toward Chicago Express, its estate and its 1 A hearing on NatTel s Examiner Motion is scheduled for February 1,

2 creditors. 2 At a minimum, these issues should be investigated by an examiner (the Examiner ) appointed pursuant to Section 1104(c) of the Bankruptcy Code at a minimum. 2. The Motion seeks a significant 4-month extension of the Debtors exclusivity period from February 23, 2005 to June 23, NatTel submits that extending the Debtors exclusive right to propose a plan with respect to Chicago Express is premature and should not be considered by this Court unless and until the potential conflicts identified by NatTel in its Examiner Motion are thoroughly investigated by the Examiner At this time, however, allowing the Debtors continued opportunity to control the plan process for Chicago Express will likely further delay (if not altogether avoid) a meaningful investigation of the potential conflicts between Chicago Express and the Non-Chicago Express Debtors and cause irreparable harm to Chicago Express and its estate. These reasons alone are sufficient to deny the relief requested in the Motion with respect to Chicago Express. 2 A full and complete discussion of the potential conflicts that exist between the non-chicago Express Debtors and Chicago Express is set forth in the Examiner Motion at pp Briefly, the facts and circumstances which suggest that the Non-Chicago Express Debtors have failed to operate Chicago Express independently include the $16.8 million receivable due to Chicago Express from debtor ATA Airlines, Inc. ( ATA Airlines ), and the $517.5 million in debt guaranteed by Chicago Express in favor of the Non-Chicago Express Debtors. 3 It should be noted that an Examiner is not the exclusive remedy for Chicago Express and its creditors in this situation. Indeed, the apparent failure of the Non-Chicago Express Debtors to adequately address their potential conflicts of interest with Chicago Express is sufficient to warrant that the United States Trustee appoint a separate committee of unsecured creditors for Chicago Express (see In re Atlas Air, Bankr. S. D. Fla. (Case No ) (separate creditors committee appointed by the United States Trustee for affiliated debtor Polar Air Cargo Inc. ( Polar ) on account of inter-company claims due by Atlas Air to Polar)), or that this Court appoint a Chapter 11 trustee for Chicago Express. Such committee or trustee should be empowered to investigate the conflicts identified in the Examiner Motion, as well as any causes of action Chicago Express may have against the non-chicago Express Debtors (and their principals and professionals) for breach of fiduciary duties owed to Chicago Express. NatTel expressly preserves all of its rights to pursue any of these remedies for the benefit of Chicago Express, its estate and its creditors. 2

3 4. Moreover, as fully set forth below, the Debtors have failed to establish that cause exists to extend exclusivity for Chicago Express. This Court should not allow the Non-Chicago Express Debtors to hold Chicago Express hostage to a restructuring process designed to extract value from Chicago Express for the exclusive benefit of the Non-Chicago Express Debtors. Other parties in interest should be given an opportunity to propose a plan for Chicago Express which both preserves its business as a going concern and allows Chicago Express to investigate and pursue claims it may have against the Non-Chicago Express Debtors (and their principals and professionals). For all of these reasons, this Court should deny the relief requested in the Motion with respect to Chicago Express. CAUSE DOES NOT EXIST TO EXTEND CHICAGO EXPRESS EXCLUSIVITY PERIOD 5. Section 1121(d) of the Bankruptcy Code permits this Court to extend the Debtors exclusive period upon which to file a plan for cause. NatTel respectfully contends that no such cause exists with respect to Chicago Express. 6. The reasons offered by the Debtors for the extension are delineated in paragraphs 8 and 9 of the Motion. They are: 10 th largest airline; leading provider of low-cost scheduled airline service; one of the largest commercial charter airlines in the U.S.; one of the largest providers of passenger airline charter service to the U.S. military; and the Southwest transaction. 3

4 7. All of these reasons were offered as to why the Debtors could not file a Plan by February 23, 2005 (based on the overall complexity of the Chapter 11 cases). However, while these reasons may apply to the non-chicago Express Debtors such as ATA Holdings and ATA Airlines, these reasons have no applicability whatsoever to Chicago Express. 8. None of the reasons offered by the Debtors in the Motion apply to Chicago Express. Chicago Express is not one of the 10 largest airlines in the U.S., is not a leading provider of low-cost airline service, conducts no charter or military operations, and was specifically excluded from obtaining benefits under the Southwest- ATA code share agreement. See (press release announcing code share alliance between ATA Airlines and Southwest fails to include any markets served by Chicago Express). 9. Furthermore, under the control of ATA Holdings, Chicago Express has recently been forced to reduce its aircraft fleet by roughly 50%, furlough roughly 50% of its employees, eliminate the vast majority of its flights from Chicago-Midway Airport, and re-trench to provide a limited amount of service out of an Indianapolis hub to a handful of destinations (many of which are in Indiana). Id. These actions, in NatTel s opinion, are strategically unwise and signify the beginning of the end of Chicago Express. In other words, time is short for Chicago Express and the last thing Chicago Express and its creditors (as opposed to the creditors of ATA Holdings) need is another 120 days under the sole management and control of ATA Holdings and the other non- Chicago Express Debtors. 4

5 WHEREFORE, NatTel respectfully requests that the Court deny the Motion as it relates to Chicago Express and grant any other appropriate relief. 4 Dated: January 26, 2005 Respectfully submitted, FREEBORN & PETERS LLP By: /s/ Aaron L. Hammer Attorneys for NatTel, LLC Aaron L. Hammer, Esq. David L. Madden, Esq. 311 S. Wacker Drive, Suite 3000 Chicago, IL Telephone: (312) Facsimile: (312) ahammer@freebornpeters.com 4 In roughly 40 pages of pleadings filed by the Debtors and the Creditors Committee in opposition to the Examiner Motion, no mention whatsoever is made of the $16.8 million receivable owed to Chicago Express by ATA Airlines, and whether and to what extent this receivable will be recovered on behalf of Chicago Express for the benefit of its creditors. This fact, among other facts, is sufficient reason for this Court not only to deny the motion seeking an extension of plan exclusivity for Chicago Express, but to appoint an Examiner for all of the Debtors estates. 5

6 CERTIFICATE OF SERVICE I hereby certify that on Wednesday, January 26, 2005 at 3 p.m. CST, I caused a true and correct copy of the foregoing OBJECTION OF CREDITOR NATTEL, LLC TO DEBTORS MOTION TO EXTEND EXCLUSIVITY PERIOD to be filed electronically with the Court and served on all of the Notice Parties, the Core Group, the 2002 List, the Appearance List, and the persons listed below, by electronic mail: U.S. Bankruptcy Court 116 U.S. Courthouse 46 E. Ohio Street Indianapolis, IN rhonda_andis@insb.uscourts.gov U.S. Bankruptcy Court 110 U.S. Courthouse 121 W. Spring Street New Albany, IN kristen_goss@insb.uscourts.gov By: /s/ Aaron L. Hammer 6