Air Baltic Corporation AS - Chapter 11 DIP Terms

DIP Terms

DIP Commitments

• Size: up to €350 million senior secured, superpriority, priming term loan facility, in three tranches:
  • Tranche 1: €175 million
    • An initial sub-tranche of €140 million, or another amount if the interim order authorized one
    • The remaining €35 million, available after entry of the final order once the credit agreement's conditions precedent are met
  • Tranche 2: up to €125 million, subject to the tranche 2 milestones and other conditions precedent (unless waived), the final order remaining in effect, and entry of the priming order
  • Tranche 3: up to €50 million, on the same conditions, using the tranche 3 milestones
• Most significantly, tranches 2 and 3 cannot fund until the court enters a priming order. The debtors' request for that order is set for hearing Nov. 17-18, 2026.
• The debtors filed Chapter 11 in the Southern District of New York on Sept. 14, 2026. The interim order was entered Sept. 16 [ECF No. 45] after a hearing on Sept. 15, and the court entered the final order on Oct. 20, 2026, after a final hearing on Oct. 19. The revised credit agreement [ECF No. 131] includes terms that settled informal objections from the official committee of unsecured creditors, which was appointed Sept. 25 and is represented by Willkie Farr & Gallagher LLP. All objections to final approval were withdrawn, resolved or overruled.

Borrower / Guarantors

• Air Baltic Corporation AS, as borrower
• Air Baltic Training, SIA and Baltijas Kravu Centrs SIA, as guarantors, jointly and severally on a senior secured superpriority basis

Agent / Lenders

• GLAS USA LLC, as DIP administrative agent, and GLAS Americas LLC, as DIP collateral agent, acting at the direction of the majority DIP lenders
• Strategic Value Partners, LLC, as DIP arranger
• Barclays Bank Ireland PLC, as fronting lender. It counts as a DIP lender until the DIP lenders take assignment of the funded loans under the commitment letter. Acting as fronting lender does not create any commitment or obligation, or waive any right, in connection with any other claims or interests it holds against the debtors.
• Financial institutions party to the credit agreement from time to time, as DIP lenders

Priming Order and Hearing Schedule

• The priming hearing is set for Nov. 17-18, 2026. Entry of the priming order is a condition to funding tranches 2 and 3. Until it is entered, the DIP liens do not attach to assets that, as of the petition date, were subject to validly perfected liens securing the prepetition bonds, and both the DIP liens and the DIP superpriority claims remain subject to liens permitted under the credit agreement.
• The final order sets the following schedule, which binds every party seeking discovery or to be heard:
  • Oct. 9, 2026: deadline to serve discovery requests
  • Oct. 23, 2026: substantial completion of document production
  • Oct. 30, 2026: completion of fact depositions
  • Nov. 2, 2026: opening expert reports
  • Nov. 9, 2026: rebuttal expert reports
  • Nov. 13, 2026: completion of expert depositions
  • Nov. 16: replies to objections to entry of the priming order
  • Nov. 17-18, 2026: priming hearing
• The schedule can be changed only in one of two ways. The first is with the consent of the debtors, the majority DIP lenders, the creditors' committee and the ad hoc group of 2029 bondholders, which filed a limited objection and reservation of rights to the DIP motion and the debtors' vendor motion [ECF No. 25]. The second is by further court order on the debtors' request, which may be decided on an expedited basis.

Fees

• The credit agreement sets a commitment fee, an upfront fee, an exit fee and a minimum return amount, and the minimum return amount forms part of the DIP obligations. The DIP agent's fees are set in a separate agent fee letter.
• The final order approves all DIP fees as fully earned, non-refundable, irrevocable and non-avoidable as of the dates the credit agreement sets. They are payable without further court order and cannot be reduced, recharacterized, disgorged, offset, subordinated or surcharged. The court found that none of the fees is unmatured interest under section 502(b)(2), a penalty or unenforceable liquidated damages.
• Principal, interest, fees and other DIP obligations may be paid in kind and capitalized as principal where the credit agreement provides.
• Expenses: the debtors pay the reasonable and documented fees and expenses of the DIP lenders, the fronting lender and the DIP agent, including their advisors and prepetition costs of negotiating the facility, without court allowance and outside the U.S. Trustee fee guidelines.
  • Before plan confirmation, these professionals send summary invoices, with no time entries required, to the debtors, the U.S. Trustee and committee counsel.
  • Those parties have 10 calendar days to object in writing. Invoices with no objection are paid within five business days after that period ends.
  • If an invoice is disputed, the undisputed amount is paid promptly and the court decides the rest.

Use of Proceeds

• Proceeds may be used only in line with the final order, the credit agreement and the approved budget, subject to the permitted variances defined in the credit agreement. The DIP secured parties have no duty to monitor how the debtors use proceeds and may rely on the debtors' representations.
• Finance lease payoff: on the interim closing date, the borrower used part of the initial tranche 1 loans to repay in full its finance lease obligations owed to Export Development Canada and/or Axiom Baltic Services Ltd. In transactions that took place substantially at the same time:
  • All liens granted under those leases were released.
  • The aircraft collateral and other pledged assets, including the Export Development Canada flight simulator, were transferred from the special purpose entities holding them to the borrower.
  • The DIP collateral agent received first-priority liens on those assets. The only other liens allowed are permitted liens and ordinary-course liens (mechanics' liens, liens arising by operation of law, aviation authority fees and charges, landing fees and EU ETS charges) that were not past due as of the interim closing date.
• The court found that the finance lease obligations were secured by valid, perfected liens on the finance lease collateral, that the debtors have material equity value in that collateral, and that the DIP lenders would not provide the facility without a first-priority lien on it.
• The final order ratifies the payoff on a final basis and binds all parties, including the creditors' committee. It states that entry of the interim order was final approval of the payoff. The payoff, and all payments to Export Development Canada or Axiom Baltic Services on account of the finance leases and financed equipment, are protected from avoidance, recharacterization, subordination or any other challenge.
• Intercompany: the loan parties may move funds, including DIP proceeds, among themselves and to affiliates in line with the approved budget. Until the facility is paid in full and commitments are terminated, intercompany obligations owed by any debtor are collaterally assigned to the DIP collateral agent.

Carve-Out

• Post-trigger cap: €6 million for allowed professional fees of debtor and committee professionals incurred after a carve-out trigger notice is delivered. Fees incurred before delivery are covered whether or not the approved budget provides for them.
• Chapter 7 trustee fees: up to $75,000
• Clerk of court and U.S. Trustee statutory fees are included in full.
• Fees paid before a trigger notice do not reduce the post-trigger cap, and compensation paid before the event of default that triggers the carve-out neither reduces nor increases it.
• Success fees: the carve-out excludes restructuring, sale, consummation, success or similar fees of any professional. The exception is Seabury Securities LLC, whose fees, including any restructuring, sale, consummation, success or financing fee, are covered to the extent the court approves its engagement letter or the specific fee.
• Trigger: the DIP agent, at the direction of the majority DIP lenders, may deliver a trigger notice only after both a continuing event of default under the credit agreement (subject to grace periods, waivers or forbearances) and acceleration of the DIP obligations. The notice must expressly state that the carve-out is triggered and the post-trigger cap invoked.
• Fee reserve: a trigger notice is a demand that the debtors use all cash on hand, and any cash received later, to fund a fee reserve account, held in trust, covering the full unfunded carve-out.
  • The DIP agent may not sweep or foreclose on the loan parties' cash until the reserve is fully funded, and must deposit any swept or foreclosed cash into the reserve.
  • Any shortfall is funded by a deemed DIP draw, pro rata across outstanding commitments, even if a default has occurred or commitments have been terminated. That draw is added to the DIP obligations.
  • Reserve funds are not DIP collateral or cash collateral and are free of the DIP liens and superpriority claims. The DIP agent has a reversionary interest in anything left after the carve-out is paid in full, unless the DIP obligations have already been repaid and all commitments terminated.
  • Payments from the reserve after a trigger notice permanently reduce the carve-out dollar for dollar and are not DIP loans; a shortfall in the reserve does not affect the carve-out's priority. Neither the carve-out, the reserve nor the budget caps the professional fees the court may allow.
• Priority: the carve-out ranks senior to the DIP liens and the DIP superpriority claims. The DIP secured parties have no obligation to pay any professional's fees.

Liens and Priorities

• Superpriority claims: the DIP obligations have allowed superpriority administrative expense claims under section 364(c)(1), effective from entry of the interim order, against every debtor on a joint and several basis.
  • The claims have recourse to all property except avoidance actions and their proceeds.
  • They are subject only to the carve-out and, until the priming order is entered, liens permitted under the credit agreement.
  • They rank pari passu among the DIP lenders and senior to any adequate protection obligations.
• The DIP liens run to the DIP collateral agent from the closing date under the interim order. They are subject only to the carve-out and, until the priming order is entered, permitted liens, and they include:
  • Under section 364(c)(2), a first-priority lien on all unencumbered property of the loan parties. This includes unencumbered cash, receivables, intellectual property, equity interests in subsidiaries, commercial tort claims, causes of action other than avoidance actions, and the collateral aircraft, collateral engines and collateral simulator.
  • Under section 364(c)(3), a second-priority lien on property the credit agreement designates as junior lien collateral, junior only to liens existing on the petition date.
  • Senior priming liens on the finance lease collateral, including the aircraft collateral, and first-priority priming liens on the rest of the initial tranche 1 collateral other than the junior lien collateral, all granted at the same time as the finance lease payoff.
• No equal or senior superpriority claims may be granted. The debtors will not seek other DIP financing unless the facility is paid in full, the credit agreement otherwise allows it, or the majority DIP lenders consent in writing.
• Perfection and challenge:
  • The DIP liens are automatically perfected, cannot be challenged under sections 510, 546, 549 or 550, and stay valid against any trustee and on conversion or dismissal.
  • The DIP agent may still file perfection documents, which are deemed filed on the petition date.
  • The DIP agent, the DIP arranger or the majority DIP lenders may require New York aircraft mortgages, Latvian commercial pledges or other local security documents, which are deemed recorded on the date the interim order was entered.
• Lease and contract provisions that require third-party consent, or payment of fees to a governmental entity, before a debtor can pledge an interest cannot be enforced against the DIP liens.

Excluded Collateral and Aircraft Matters

• Aircraft leases and financed equipment: the aircraft collateral and other finance lease collateral are DIP collateral. Otherwise, the DIP collateral excludes:
  • The debtors' leasehold interests in leases of aircraft equipment (aircraft, airframes, engines, flight simulators and parts), and the leased equipment itself
  • Aircraft equipment subject to other financing arrangements
  These exclusions apply only where the governing agreement prohibits a lien, or requires a non-debtor's consent that has not been obtained. The DIP liens still attach to sale and other proceeds of this property.
• Cape Town:
  • No DIP liens attach to property on which the Cape Town Convention and its aircraft protocol do not permit liens, but the DIP liens reach the proceeds.
  • Aircraft lessors, secured parties and conditional sellers keep all their rights under the Cape Town treaty and section 365(d)(5).
  • All parties reserve the right to contest whether the treaty applies to any aircraft equipment or to the debtors.
• Credit card holdbacks: amounts held back by credit card processors are outside the DIP liens until they are paid to the debtors. The processors' rights under the customer programs motion and interim order [ECF Nos. 8 and 38] are preserved.

Avoidance Actions

• Excluded: under an agreement with the creditors' committee, no DIP liens are granted on avoidance actions or their proceeds, and the final order separately excludes them from the property the DIP superpriority claims can reach. Avoidance actions are defined as claims under sections 502(d), 544, 545, 547, 548, 550 and 553, any other avoidance action under the Bankruptcy Code, or similar non-bankruptcy law.
• Before seeking payment from proceeds of the debtors' claims under sections 502(d), 544, 545, 547, 548, 549, 551, 553(b), 732(2) or 742(2), the DIP secured parties must use commercially reasonable efforts to recover first from all other DIP collateral.

Credit Bid

• The DIP agent, at the direction of the majority DIP lenders and directly or through acquisition vehicles, has an unqualified right under section 363(k) to credit bid all or any part of the outstanding DIP obligations. The right applies to any sale of a loan party's assets, whether under section 363 or 1129, by a Chapter 7 trustee under section 725, or otherwise, subject to the loan documents. The DIP agent may assign the right to an acquisition entity or joint venture formed for the bid.

Events of Default and Remedies

• Remedies notice period: five business days. Events of default are those defined in the credit agreement.
• When a default occurs, the DIP agent, at the direction of the majority DIP lenders, may deliver a default notice to the debtors, the creditors' committee and the U.S. Trustee, terminate, reduce or restrict remaining commitments, and accelerate the DIP obligations, all without further court order. The declaration takes effect, subject to the carve-out, five business days after notice to the debtors.
• During the notice period:
  • The debtors may not request further draws, other than the deemed carve-out draw.
  • The debtors, the committee, the U.S. Trustee or any other party in interest may seek an emergency hearing on whether a default has occurred and on appropriate relief, including non-consensual use of cash collateral. The DIP secured parties are deemed to consent to that hearing.
• When the notice period expires, the automatic stay ends without further court order, unless a party has obtained an order preventing the action. The DIP agent may then:
  • Terminate the debtors' use of cash collateral and DIP proceeds, except for the carve-out
  • Sue for specific performance or other relief under the loan documents
  • Foreclose on DIP collateral, including by freezing cash in the debtors' accounts
  • Set off account balances against the DIP obligations and apply collateral proceeds to them
  • Charge default interest under the credit agreement
  • Exercise remedies under the New York Uniform Commercial Code and the Cape Town Convention and Protocol
• The DIP secured parties cannot force a sale of the debtors' assets under section 363(b) or other law without court approval, though their foreclosure and other enforcement rights are unaffected. Their remedies are not impaired if consent to the debtors' use of cash collateral is withdrawn or terminated.

Budget, Reporting and Amendments

• The borrower must send Willkie Farr & Gallagher LLP, as committee lead counsel, and any committee financial advisor each approved budget, once the DIP agent or the majority DIP lenders approve it, and every financial report it provides to the DIP lenders, as soon as reasonably practicable.
• Any extension of a DIP milestone must be noticed on the docket within one business day after it takes effect.
• Amendments:
  • Non-material amendments or waivers of the approved budget or the loan documents need only majority DIP lender consent, with no court approval, and copies go to the U.S. Trustee and committee counsel.
  • All other amendments, including material ones, must be in writing, signed by the borrower, the loan parties and the majority DIP lenders, and approved by the court after notice to the U.S. Trustee and committee counsel.
  • Where reasonably practicable, the borrower must endeavor to give committee lead counsel at least three business days' notice of any proposed amendment, waiver, consent or other modification to the loan documents.

Waivers

• Section 506(c): no administrative costs or expenses, other than the carve-out, may be charged against the DIP secured parties or the DIP collateral.
• Section 552(b): the "equities of the case" exception does not apply to the DIP secured parties.
• Marshaling: the DIP secured parties are not subject to marshaling or any similar doctrine. They remain bound by the requirement above to recover from other collateral before using proceeds of the listed estate claims.

Other Lender Protections

• Non-interference:
  • No prepetition creditor, agent or trustee may act, or fail to act, in a way that impedes the transactions under the final order, the priming order (if entered) or the loan documents, including the finance lease payoff and the related grant of liens to the DIP lenders.
  • Creditors that consent to the facility under their own agreements are protected: all other creditors are barred from asserting claims or taking actions against them.
  • The debtors may not grant liens on DIP collateral to anyone else, including prepetition creditors.
• No discharge: notwithstanding section 1141(d), plan confirmation does not discharge the DIP obligations unless they are paid in full on or before the plan effective date. The DIP liens and superpriority claims keep their priority through any confirmation, conversion, dismissal or withdrawal of the reference until the facility is repaid.
• The court found that the facility came out of a competitive process, that the DIP agent and lenders are not control persons or insiders, and that the debtors have no claims against them. It granted the lenders section 364(e) protection. The order also provides that the lenders are not responsible persons, owners or operators, or successors of the debtors.
• The DIP secured parties do not need to file proofs of claim. The DIP agent may file a single consolidated administrative claim against all the debtors.
• Where the final order conflicts with the loan documents, the DIP motion, the interim order or any other order or agreement, the final order governs, unless the provision in question defers to a term defined or set forth in another loan document.