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Aero Mexico to emerge from bankruptcy

 It seems Aero Mexico's owners have found a solution in the cash US$ 1 billion injection (in new equity) and US$ 1 billion in senior unsecured debt (the DIP financing was done in September).  The new investor Appollo Management has a long and distinguished reputation for buying troubled assets and turning them around.  It's not always been pretty but the AM model could be interesting for several players in the industry.

AM went into Chapter 11, sometime last summer, when it was clear that its board could not in good conscience continue trading; interestingly enough they filed in the US, but that doesn't matter.  The challenge for the new owner is to discover how it can make money on its investment.

Apollo is a medium-term investor, they will look to exit their investment within 5 to 7 years -- this has worked well for them in the past, moreover, as a fund, they really have not much choice, but I suspect that they see AM has a long term investment that just needs to be turned around.

Apollo will not have the confidence of the Unions, which did everything they could to destroy the agreement -- having Americans as majority shareholders cannot be fun for this very Mexican company.  The company has been perceived as the National Flag carrier despite being a private company for many years

The airline will have to make some hard decisions on its global ambitions.  Its large fleet of B777 and B787 may (10 and 8 respectively) and its large order book for 737MAX means that the airline is well positioned to cover North America -- with a sprinkling of foreign destinations, but I suspect that the new owners will seek to use Delta massive global fleet to cover the international ambitions of AM.

This investment is a very positive move and is one of the very first massive investments required to bring back the airline industry back into business.

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