Guidance on the Enforceability of Lockup Provisions

The Lockup Provision In GOL Linhas

In GOL Linhas, the jointly-administered debtors (the Debtors), who operated a Brazilian airline, were negotiating agreements with their aircraft lessors for modifications of lease terms to be consistent with the Debtors' commercial objectives in their Chapter 11 cases. The terms of the Debtors' debtor-in-possession (DIP) financing required the Debtors to, among other things, enter into lease modification agreements for 65 and then 90 aircraft within certain deadlines. To that end, the Debtors negotiated agreements and stipulations with various aircraft lessor counterparties, which stipulations all included a lockup provision requiring the counterparties to support any plan filed by the Debtors at a later date. Specifically, the lockup provision provided that, if a disclosure statement for a Chapter 11 plan is approved by the bankruptcy court, each counterparty agreed that it shall vote to accept the plan so long as the plan and disclosure statement are not inconsistent with the terms of the settlement, there are no defaults on the Debtors' post-petition obligations to the counterparty, and the Debtors achieve certain liquidity and debt ratio benchmarks measured as of the effective date of the plan. The Debtors' Chapter 11 cases were in their infancy at the time the Debtors entered into the settlements with the aircraft lessors. At that time, no disclosure statement was filed and no plan term sheet was shared by the Debtors.