FLYi files amended liquidation plan to add convertibles class, update allowed claim amounts

By Caroline Salls

Pittsburgh, Nov. 14 - FLYi, Inc. filed an amended plan of liquidation and related disclosure statement Tuesday that adds a convertible notes class, updates the amount of proceeds it has received from monetizing its claim against United Airlines and updates the estimated amount of allowed claims for creditor classes, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the disclosure statement, the company's primary remaining asset is the $103.38 million it received from monetizing its claim against United Airlines.

When the original plan was filed in August, the company had only received $95.75 million from monetizing the United claims.

The $750 million claim against United entitled FLYi to shares in reorganized United, and FLYi received 3.26 million shares on June 23 and $250,000 shares on Sept. 22.

Two liquidation trusts will be established under the plan to handle creditor distributions, one for FLYi creditors and one for Independence Airlines creditors.

The FLYi distribution trust assets include proceeds of any recovery actions, the United claim settlement proceeds, which will be distributed 50% to the FLYi trust and 50% to the Independence trust, cash on hand and government and corporate bonds.

The Independence trust assets include its share of the United claims settlement proceeds, and the assets of the estates of all debtors other than FLYi.

Under the plan, holders of $126.7 million in convertible notes claims will recover 10.4% in a share of the FLYi distribution trust assets.

The debtors will not be substantively consolidated under the plan.

Plan creditor treatment

Treatment of creditors under the plan will include:

• Holders of $7 million to $15.4 million in secured claims will receive 100% recovery in cash or return of collateral;

• Holders of $3.9 million to $12.6 million in priority claims will recover 100% in cash;

• Holders of $341.7 million to $678.4 million in general unsecured claims against FLYi will receive 5.5% to 10.4% recovery in their share of the FLYi distribution trust assets;

• Holders of $126.7 million in convertible notes claims will recover 10.4% in a share of the FLYi distribution trust assets. This class was not included in the original plan;

• Holders of $425.4 million to $798.8 million of general unsecured claims against debtors other than FLYi will receive 6.9% to 19.6% recovery in an Independence debtor distribution trust;

• Holders of $100,000 to $200,000 of FLYi convenience claims, which are general unsecured claims of less than $1,000, will receive 10.4% recovery in cash from the FLYi distribution trust account;

• Holders of $500,000 to $9.5 million in Independence debtor convenience claims will receive 19.6% recovery in cash from the Independence distribution trust account;

• Holders of intercompany claims will receive nothing from FLYi, but they will be deemed to be paid from the United claims settlement proceeds in an amount equal to FLYi's 50% share in the Independence distribution trust assets as part of a global resolution of issues regarding the distribution of the United settlement proceeds; and

• Holders of penalty claims, subordination claims and old stock interests will receive no distribution under the plan.

A hearing on approval of the disclosure statement is scheduled for Friday.

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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