Wheels Up (WUP, Teterboro) has avoided bankruptcy by ceding control to new moneylenders, including Certares Management LLC and Knighthead Capital Management LLC, who will receive 95% of the company's shares in exchange for providing a turnaround investment of USD500 million, the parties announced.

The non-binding agreement, in principle, includes funds contributed by Wheels Up's 20% shareholder, Delta Air Lines (DL, Atlanta Hartsfield Jackson), and CK Opportunities Fund I, LP, co-managed by Certares and Knighthead affiliates. The facility will comprise a USD400 million term loan and a USD100 million liquidity facility from Delta, totalling USD500 million to Wheels Up.

Explaining the deal in more detail, the parties said: "Delta will provide Wheels Up with USD150 million in new money-term loans and a USD100 million liquidity facility. An additional USD150 million term loan will be provided under the facility by CK Opportunities. Furthermore, to date, other investors have agreed in principle to join Delta and CK Opportunities to provide USD50 million in term loans under the facility. The additional USD50 million will be allocated to certain other investors as approved by Delta, Certares and Knighthead."

In exchange for the investment, Wheels Up will issue Class A common stock to the participating new moneylenders, who will end up owning 95% of the company following the transaction. "The company's audit committee determined that the delay that would be caused in obtaining stockholder approval would jeopardise the company's financial viability. Shares representing approximately 80% of the company's outstanding equity are expected to be issued without prior shareholder approval based on the 'Financial Distress Exception' provided for in the New York Stock Exchange shareholder approval policy." Wheels Up expects to issue the shares ten days after sending a letter informing shareholders of the situation. "The remainder of the shares to be issued to the new moneylenders will be subject to stockholder approval of an amendment to Wheels Up's certificate of incorporation and will be issued after receipt of stockholder approval." The transaction will be subject to completing definitive documentation, customary closing conditions and other approvals.

The announcement on August 15 of the rescue investment came after Wheels Up, which offers membership-based and on-demand private jet services, issued a stock market warning about its ability to continue operations should it not obtain additional funding in the near term.

In a filing to the US Securities and Exchange Commission (SEC), Wheels Up Experience Inc. also disclosed it was in discussions around strategic business partnerships, that Delta had provided a promissory note for a short-term capital infusion, and that business/charter specialist Airshare (XSR, Kansas City Downtown) intended to acquire Wheels Up's non-core aircraft management business. Wheels Up has also talked with lenders about debt restructuring while exploring other options to avoid a bankruptcy filing, including talks with Bain Capital and MSD Capital.

Meanwhile, as part of the new transition, Delta Chief Financial Officer Dan Janki will join the Wheels Up board as chairman, while Ravi Thakran will revert to being a director after being executive chairman.

"The partnership will create new opportunities for Wheels Up to drive strategic, operational, and financial improvements for its customers in the months and years ahead," Delta Chief Executive Officer Ed Bastian said in the statement. "Delta's unmatched expertise in premium travel, customer loyalty, corporate sales, operational reliability and aircraft maintenance, combined with Certares' and Knighthead's experience and global reach, are expected to speed Wheels Up on its path to profitability."

Wheels Up Interim Chief Executive Officer and Chief Financial Officer Todd Smith said: "Over the past few months, we have been intensely focused on taking clear steps to improve our product offering and our operational delivery. Those actions are already showing results, and we look forward to continuing and accelerating that progress with the support of our new partners. Our continued close work with the Delta team will enable us to further integrate our digital experiences, member benefits and our operations."

After having been unable to file its 2Q23 financial results, which sent its shares tumbling, the company, on August 14, announced its results for the year ending June 30, 2023, revealing that revenue declined by USD90 million year-on-year to USD335 million. Its net loss increased year-on-year to USD161 million, driven by a USD70 million non-cash goodwill impairment charge. Adjusted EBITDA improved slightly year-on-year to a loss of USD40 million.

The company noted that its active membership had decreased 8% year-on-year to 11,639, offset by a higher mix of core members. Active users decreased by 4% year-on-year to 12,549. Live flight legs decreased 16% year-over-year to 18,137, "reflecting our efforts to focus on profitable flying," the company explained. Revenue fell 21% year-over-year, primarily driven by reduced flight revenue and reduced aircraft sales.