Last August the low-cost airline Wind Jet suspended all its flights and ceased all operations, causing several problems for its passengers, and prompting Enac (Italian Civil Aviation Authority) to put in place the necessary reprotection mechanisms with the cooperation of Alitalia, and Meridiana the second largest Italian airline operating domestic, European and intercontinental flights. Livingston - the new Italian airline operating international and intercontinental flights mainly from its base at the airport of Milan Malpensa - also operated special flights for the re-accommodation for the passengers involved.
Wind Jet was founded in 2003 to operate flights from the major Italian cities and some foreign airports to Sicily. In less than a decade, from its hub in Sicily (Catania), the company became the fourth Italian airline by number of passengers.
The financial difficulties of the last years and the absence of adequate investments and/or marketing strategies brought the company to the decision to cease all flights, leaving several passengers, travel agencies, suppliers and employees, to face the risk of bankruptcy.
Only recently the airline decided to avail itself of the new debt restructuring rules introduced by the Italian Government with the Law Decree number 83 dated 22 June 2012 (the so called "decreto sviluppo"), which establishes important measures aimed at stimulating the Italian economy and also significant amendments to the Italian Bankruptcy Act, in order to better cope with the current financial crisis.
The Decree represents the very last step of a reform movement of the Italian bankruptcy system which began in 2004 with the aim of making the distressed Italian market more appealing for potential domestic and international investors. The new rules have indeed the purpose to facilitate the restructuring of distressed companies through quicker access to judicial composition with creditors, interim financing and a new special form of composition aimed at ensuring the continuity of the debtor's business.
The procedure is supervised by the Court and is somewhat similar to Chapter 11 in the U.S, it has been used in prominent restructurings such as Mariella Burani Fashion Group and Fondazione San Raffaele del Monte Tabor.
Wind jet has therefore filed an application for concordato preventivo (Composition with creditors) ex new formulation of article 161 para 6 of the Italian Bankruptcy Act, according to which the debtor is now granted a 60 to 120 days "automatic stay", while under the previous regime the automatic stay was conditional upon the filing of the restructuring plan alongside the petition.
Thanks to this new option the debtor can now file the petition and dedicate the following 60/120 days to the preparation of the plan without being distracted by the often frequent enforcement actions of creditors.
This means that Wind Jet may immediately accede to the protections offered by the concordato preventivo and then carry on the negotiations with its creditors benefiting from the automatic stay.
These new features may have the effect of granting debtors additional leverage in the restructuring negotiations given that, once the petition is filed, the stakeholders will have an incentive to react in order to achieve a restructuring within the assigned timeline. Otherwise, in fact, the alternative scenario will likely be a bankruptcy filing.
At the end of the automatic stay period the debtor is now allowed to switch from a concordato preventivo to a proceeding under Article 182bis Italian Bankruptcy Act (the "182bis Proceeding"), by filing a restructuring agreement.
After the filing of either a concordato preventivo proposal or an agreement under a 182bis Proceeding, the automatic stay runs until completion of the proceeding, that is confirmation by the Court of either the concordato preventivo or the 182bis Proceeding.
Following the filing of the petition the debtor can now be authorized by the Court to terminate pending agreements or alternatively to suspend execution thereof for a 60-day term which can be extended only once.
Under the new rules, the debtor may also immediately request Court authorization to seek for collection of the financing necessary to fund its ongoing operations during the proceeding, provided that an independent expert certifies that the new money is consistent with the plan and instrumental to a better satisfaction of the creditors.
From the date of filing for a concordato preventivo or a 182bis Proceeding until completion of the proceedings, the debtor is no longer required to recapitalize the company to cover possible losses affecting the corporate capital.
In light of the new provisions (above summarized) Wind Jet filed a petition for concordato preventivo before the Court of Catania which recently (on 13 September 2012) granted Wind Jet a deadline of 120 days to submit the proposal to creditors, the restructuring plan and the relevant documents.
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