FLYi indenture trustee, noteholder ask court to deem intercompany claims class as rejecting plan

By Caroline Salls

Pittsburgh, Jan. 12 - FLYi, Inc.'s indenture trustee for its $125 million 6% convertible notes due 2034 and the holder of 60% of the notes requested an order deeming the company's intercompany claims class to have rejected its plan of liquidation or disallowing the votes of the intercompany claims class, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

U.S. Bank NA is the indenture trustee, and QVT Financial LP is the holder of 60% of the notes.

According to the motion, while FLYi has chosen not to substantively consolidate with Independence Air, Inc., the plan eliminates a $285.5 million intercompany claim held by FLYi against Independence, even though the intercompany claim is reflected in FLYi's books and records as a valid intercompany claim and is one of two major assets belonging to FLYi and its creditors.

U.S. Bank and QVT said FLYi also disregards the mandatory bankruptcy code principles that require deemed rejection of a plan by a class that receives no distribution by saying that FLYi will vote the intercompany claim in favor of the plan, despite the fact that unsecured creditors receive no distribution on account of this claim.

A hearing is scheduled for March 12.

FLYi, the Dulles, Va.-based parent of Independence Air, filed for bankruptcy on Nov. 7, 2005. Its Chapter 11 case number is 05-20011.

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