Mesa Air Group: Material Agreement, Financial Non-Reliance, Officer Changes

TL;DR

**Mesa Air Group just flagged past financials as unreliable and made big leadership and agreement changes.**

AI Summary

Mesa Air Group, Inc. filed an 8-K on January 18, 2024, reporting several significant events that occurred on January 11, 2024. These include entering into a material definitive agreement, a non-reliance on previously issued financial statements, and changes in directors or officers. This matters to investors because the non-reliance on past financial statements suggests potential inaccuracies, which could impact the company's perceived financial health and stock valuation, while new agreements and officer changes could signal strategic shifts.

Why It Matters

The non-reliance on past financial statements could indicate accounting issues, potentially leading to restatements and impacting investor confidence and stock price. New agreements and officer changes could signal strategic shifts or operational improvements.

Risk Assessment

Risk Level: high — A non-reliance on previously issued financial statements is a serious red flag, indicating potential accounting errors or misrepresentations that could lead to restatements and significant stock price volatility.

Analyst Insight

A smart investor would exercise extreme caution, thoroughly investigate the reasons behind the non-reliance on financial statements, and consider holding off on new investments or reducing exposure until the financial situation is clarified and restated financials are available.

Key Players & Entities

• Mesa Air Group, Inc. (company) — the registrant filing the 8-K
• January 11, 2024 (date) — date of the earliest event reported in the 8-K
• January 18, 2024 (date) — date the 8-K was filed

FAQ

Key Financial Figures

• $10.5 million — the repayment in full of the Company's $10.5 million Effective Date Bridge Loan (as defined
• $2.1 million — rresponding reduction) of approximately $2.1 million in Revolving Loans (as defined therein)
• $5.0 m — originally purchase by the Company for $5.0 million, (ii) as a result of the repaymen
• $63.5 million — are projected to generate approximately $63.5 million in incremental revenue over the next tw
• $30 million — the Company identified an approximately $30 million factual balance sheet misstatement asso
• $198.0 m — engines for combined gross proceeds of $198.0 million, which has been and will be used
• $174.3 million — h has been and will be used to pay down $174.3 million in debt, as summarize below: Sold 7 C
• $71.2 million — NextGen aircraft for gross proceeds of $71.2 million. Sold 7 remaining of 11 CRJ-900s prev
• $21.0 million — ntracted for sale for gross proceeds of $21.0 million. Entered into agreements to sell 15 C
• $105.8 million — ird parties for total gross proceeds of $105.8 million Item 9.01 Financial Statements and E

Filing Documents

• d726123d8k.htm (8-K) — 43KB
• d726123dex991.htm (EX-99.1) — 21KB
• 0001193125-24-010261.txt ( ) — 195KB
• mesa-20240111.xsd (EX-101.SCH) — 3KB
• mesa-20240111_lab.xml (EX-101.LAB) — 18KB
• mesa-20240111_pre.xml (EX-101.PRE) — 11KB
• d726123d8k_htm.xml (XML) — 3KB

01

Item 1.01. Entry into a Material Definitive Agreement. Amendment to Revolving Line of Credit Mesa Air Group, Inc.'s (the " Company ") wholly owned subsidiaries, Mesa Airlines, Inc. (" Mesa ") and Mesa Air Group Airline Inventory Management, L.L.C. (" Mesa Inventory Management " and, together with Mesa, the " Borrowers "), previously entered into a Second Amended and Restated Credit and Guaranty Agreement dated as of June 30, 2022 (as amended by Amendment No. 1 to Second Amended and Restated Credit and Guaranty Agreement, dated as of December 27, 2022, Amendment No. 2 to Second Amended and Restated Credit and Guaranty Agreement, dated as of January 27, 2023, and Amendment No. 3 Second Amended and Restated Credit and Guaranty Agreement, dated as of September 6, 2023, the " Existing Credit Agreement "), with Wilmington Trust, National Association (" WTNA ") (as successor to CIT Bank, a division of First-Citizens Bank & Trust Company), in its capacity as Administrative Agent, WTNA (as successor to First-Citizens Bank & Trust Company (as successor by merger to CIT Bank, N.A.)), as collateral agent and the lenders from time to time party thereto, which is guaranteed by the Company. As previously reported, United Airlines, Inc. (" United ") purchased and assumed all of CIT Bank's rights and obligations under the Existing Credit Agreement pursuant to a separate Assignment and Assumption Agreement and in connection with entering into the Third Amended and Restated Capacity Purchase Agreement with United, dated as of December 27, 2022 (the " United CPA "). On January 11, 2024, the Company entered into Amendment No. 4 to the Existing Agreement, Amendment No. 1 to Stock Pledge Agreement and Limited Waiver of Conditions to Credit Extension United (collectively, " Amendment No. 4 ") which provides for the following: (i) the repayment in full of the Company's $10.5 million Effective Date Bridge Loan (as defined therein) obligations, and the prepayment (and corresponding red

02

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. On January 18, 2023, the Audit Committee of the Board of Directors of the Company concluded, after discussion with the Company's management and RSM US LLP (" RSM "), the Company's independent registered accounting firm for the year ended September 30, 2023, that the Company's previously issued unaudited condensed consolidated financial statements as of and for the three and nine months ended June 30, 2023, included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (the " 3 rd Quarter 10-Q ") filed with the SEC on August 14, 2023, the earnings release relating to the Company's financial results as of and for the fiscal quarter ended June 30, 2023 and in reports, related earnings releases, investor presentations or similar communications of the specified financial statements, should no longer be relied upon for the reason discussed below. Subsequent to the filing of its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and in connection with the preparation of its Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the " 2023 Form 10-K "), the Company identified an approximately $30 million factual balance sheet misstatement associated with the classification of debt on the condensed consolidated balance sheet as of June 30, 2023. This error was due to certain debt covenant requirements that were not met under its Second Amended and Restated Credit and Guaranty Agreement dated as of June 30, 2022 (as amended, the " United Credit Agreement "), with United Airlines, Inc. (" United "). The debt covenants consisted of the 12-month rolling consolidated interest and rental coverage ratio covenants for the fiscal period ended June 30, 2023 and September 30, 2023. As a result, the $30 million should have been classified as current debt on the face of the balance sheet as opposed to l

Forward-Looking Statements

Forward-Looking Statements This Current Report on Form 8-K may be deemed to contain forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include statements regarding the effects of the restatement of the Company's past financial statements and the filing of the Company's amended periodic reports. Words such as "future," "anticipate," "believe," "estimate," "expect," "intend," "plan," "may," "might," "predict," "will," "would," "should," "could," "can," "may," or the negative or other variations thereof, and similar words or phrases or comparable terminology, are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions, or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company's control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Important risks and uncertainties that could cause the Company's actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the timing and nature of the final resolution of the accounting issues discussed in this Current Report on Form 8-K, any delay in the filing of the 2023 Form 10-K and other required periodic reports with the U.S. Securities and Exchange Commission (the "SEC"), whether a restatement of financial results will be required for other accounting issues for the same or other periods in addition to the misstate correction in the 2023 Form 10-K currently expected by management, additional uncertainties related to accounting issues generally, adverse effects on the Company's business as a result of the correction process and the risks identif

02

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. The Company is deeply saddened to report that Daniel McHugh, a member of the Company's board of directors, passed away on January 12, 2024. Mr. McHugh had been a member of the Board since 2020, and was a member of the Compensation Committee of the Board. No replacement for Mr. McHugh has been appointed at this time.

01

Item 8.01 Other Events. On January 18, 2024, the Company also provided the following update regarding its ongoing asset sale program. Since September 2023, the Company has sold or entered into agreements to sell excess CRJ-900 aircraft and related engines for combined gross proceeds of $198.0 million, which has been and will be used to pay down $174.3 million in debt, as summarize below: Sold 7 CRJ-900 NextGen aircraft for gross proceeds of $71.2 million. Sold 7 remaining of 11 CRJ-900s previously contracted for sale for gross proceeds of $21.0 million. Entered into agreements to sell 15 CRJ-900 airframes and 65 CF34-8C5 engines to various third parties for total gross proceeds of $105.8 million

Financial Statements and Exhibits

Financial Statements and Exhibits. (d) Exhibits Exhibit No. Exhibit Description 99.1 Press Release, dated January 18, 2024, issued by Mesa Air Group, Inc. 104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Mesa Air Group, Inc. Date: January 18, 2024 By: /s/ Brian S. Gillman Brian S. Gillman Executive Vice President and General Counsel

View Full Filing

View this 8-K filing on SEC EDGAR