Opinion ID: 149094
Heading Depth: 3
Heading Rank: 1

Heading: Bankruptcy Filing and Exercise of Remedies by Indenture Trustees

Text: On September 14, 2005, Delta filed a voluntary Chapter 11 petition. On September 28, 2005, the Office of the United States Trustee appointed an Official Committee of Unsecured Creditors. On April 25, 2007, the bankruptcy court confirmed Delta's Joint Plan of Reorganization, which became effective on April 30, 2007. Delta's bankruptcy filing was an event of default under all of the Leases and Indentures, and entitled the Indenture Trustees to exercise the remedies provided under the Leases. Many of the aircraft at issue were disposed of pursuant to a term sheet (the Bingham Term Sheet) negotiated among Delta and an ad-hoc committee of debtholders and approved by the bankruptcy court on February 15, 2006. The Bingham Term Sheet authorized and directed a series of transactions, consisting of (1) foreclosure upon the collateral, including the aircraft, by the Indenture Trustees, (2) rejection of the applicable Leases, and (3) execution of new, post-petition leases. The Owner Participants did not participate in the new leases. The Bingham Term Sheet set forth a formula to determine the amount of the Indenture Trustees' claims for rejection damages, roughly: SLV (calculated as of the date of Delta's filing), less the aggregate rent payments to be received under the restructured leases, less the expected residual value of the aircraft at the end of the restructured lease terms. Northwestern was the Owner Participant in leveraged leases of three aircraft (tail numbers N182DN, N803DE, and N804DE). Early in the bankruptcy, Delta rejected its leases with respect to airplanes N803DE and N804DE, whereupon the Indenture Trustee repossessed and sold the aircraft. The Indenture Trustee foreclosed on Northwestern's remaining plane and re-leased it to Delta pursuant to the Bingham Term Sheet. The Indenture Trustee filed three proofs of claim arising from Delta's default under the Northwestern Leases. The claims for N803DE and N804DE were for SLV less sale proceeds, and the claim for N182DN was for the lease rejection damages stipulated in the Bingham Term Sheet. DFO was the Owner Participant in leveraged leases of eight aircraft (tail numbers N914DL, N915DL, N916DL, N954DL, N955DL, N956DL, N957DL, and N958DL). The Indenture Trustee foreclosed on three of DFO's aircraft and re-leased them to Delta pursuant to the Bingham Term Sheet (N914DL, N915DL, and N916DL). With respect to the other five aircraft, Delta and the Indenture Trustee entered into restructuring agreements under which DFO's interest in the aircraft was foreclosed out. The restructuring agreements (as under the Bingham Term Sheet) provided for new leases and stipulated lease rejection damages (calculated by reducing SLV by the present value of the restructured lease and the residual value of the aircraft). AT & T was the Owner Participant in leveraged leases involving seven aircraft (tail numbers N131DN, N178DN, N660DL, N962DL, N963DL, N964DL, and N965DL). The Indenture Trustee foreclosed on all of AT & T's aircraft and re-leased them to Delta pursuant to the Bingham Term Sheet.