Judge Approves Competing Bids

[USA320Pilot]

Door open to other US Airways suitors

The court overseeing US Airways' bankruptcy approved a request Tuesday to give parties other than America West Airlines 30 days to submit offers for US Airways' assets.

It's improbable, however, that a higher bid would emerge by June 30 to compete with US Airways' merger deal with America West, analysts said.

"I don't see alternate bids for the entire package emerging," said Robert Mann Jr., head of R.W. Mann & Co., an airline consultant.

"It's possible you may see some people cherry-picking at certain assets," Mann said. But piecemeal bids for assets that could derail the US Airways-America West merger would have a tough time winning approval from the bankruptcy court.

Wellington manages more than $470 billion in U.S. and international investments -- including tens of millions in stock of several major air carriers.

"US Airways must be presenting a very compelling case" to potential investors, said Mann. "There's more interest than expected."

Complete Story

Regards,

USA320Pilot

 

[ClueByFour]

In addtion, Reuters reported, "US Airways officials said no new bids are on the table."

[post="274530"][/post]​

There is one-liner potential out the wazoo here, but I suppose one should ask oneself:

Is this really a "stunning" development?

 

[delldude]

"It's possible you may see some people cherry-picking at certain assets," Mann said. But piecemeal bids for assets that could derail the US Airways-America West merger would have a tough time winning approval from the bankruptcy court.

all that has to be done is for bids for assets roll in where the board of creditors see a bigger quicker gain on their returns and its lights out for U and the love affair with Parker and company

 

[WNjetdoc]

Airtran will be getting involved on the "parting out" process. That will be just the tip of the iceburg.

 

[funguy2]

According to today's WSJ column, Judge Mitchell may look askance at proposals to buy selected assets if they threaten to scuttle the merger, said Roger King, an analyst for independent research firm CreditSights. Asset buyers, he said, "are going to have to make a compelling case that the combined net value for all the parts is worth more than the value of the merged entity."

While I have not seen any evidence, I would have to believe that if the judge approves some deal where US Airways sells certain key assets, that AWA could walk away and get the $15mil breakup fee. Why would AWA want to move forward with a US Airways transaction if the BK judge approves selling gate lease rights at PHL or LGA or selling slots to a non-US affiliated carrier (i.e. something other than the Republic deal)?

That leads me to believe this: In order to breakup this deal, the other airlines will have to bid on a number of assets, and that would have to bring in almost $1bil... I am making the assumption that a successful breakup of US Airways would require at least
~ $750mil to ATSB backed loans (is a federal judge going to short change the feds? unlikely in my opinion)
~ 119mil to US Airways creditors (I heard Parker say the Market Cap of the merged company would be $850mil, 14% of which is held by US Airways creditors)

So, that would again beg the question: How much are US Airways' assets worth?
Some of the numbers we've heard:
$110mil for MDA assets and commuter slots at LGA/DCA
$200mil for the Shuttle assets

How much are lease rights for gates at PHL worth to Southwest? A few million, maybe? Maybe even $5mil/gate, based on their ATA/MDW experience.
How much are the owned aircraft worth... And does parking the leased fleet devalue the owned aircraft (i.e. all of US Airways aircraft hit the market at once)
And how does the fact that most of these assets are already mortgaged affect the equation?

For these reasons, its hard to see a viable competing bid arise... Especially if it triggers an event where AWA can walk away.

 

[FWAAA]

So, that would again beg the question:  How much are US Airways' assets worth?
Some of the numbers we've heard:
$110mil for MDA assets and commuter slots at LGA/DCA
$200mil for the Shuttle assets

How much are lease rights for gates at PHL worth to Southwest?  A few million, maybe?  Maybe even $5mil/gate, based on their ATA/MDW experience.
How much are the owned aircraft worth...  And does parking the leased fleet devalue the owned aircraft (i.e. all of US Airways aircraft hit the market at once)
And how does the fact that most of these assets are already mortgaged affect the equation?

For these reasons, its hard to see a viable competing bid arise...  Especially if it triggers an event where AWA can walk away.

[post="274613"][/post]​

While I completely agree that it is unlikely that anyone will outbid America West and its new investors, don't sell the US assets so short. The slots were appraised at between $347 million and $462 million, depending on the appraisal method. These values were accepted by the judge in approving US' motion to dip into the ATSB's cash collateral.

The gates were valued at another $15 million to $98 million.

Here's the cite of the appraisals: http://www.donlinrecano.net/dr201/mwc/04-1...000006-0000.pdf

If the slots and gates are really worth that much, a bid by AA (with over $3 billion of unrestricted cash) should not be completely unexpected. Of course, AA is really sitting on that cash in case UAL goes belly up (Pacific ops).

A minor point: Isn't the ATSB loan balance now less than $750 million? I thought it was paid down somewhat below that figure.

If someone does buy the slots and gates, the current unrestricted cash of US (about $500 million right now) would go to pay off the ATSB, plus the cash paid by the buyer of the slots and gates. I assume that the creditors would be better off if the slots and gates were sold for $400 million or so. HP certainly isn't paying anywhere near that much.

 

[funguy2]

FWAAA: I could not recall those appraisals... Thanks for bringing them up. I remembered that they were appraised, just did not know the numbers.

And yes, the ATSB balance is probably less than that... I was estimating. I beleive it is still above $700mil.

However, its important to note that the figures you have state are all of the LGA/DCA slots and 290 gates at 14 different airports. Since US Airways is still in Chapter 11 - Reorganization, it is unlikely that they company would be able to unload all of those assets and continue to operate or reorganize.

I would also note that those appraisals value all of the assets at around $850mil... which is probably close to trump AWA's bid, but it would force the competing bidder or bidders to either take on the whole of US Airways or force it into Chapter 7 liquidation. Neither of which is likely, in my opinion.

 

[TechBoy]

That leads me to believe this: In order to breakup this deal, the other airlines will have to bid on a number of assets, and that would have to bring in almost $1bil... I am making the assumption that a successful breakup of US Airways would require at least
~ $750mil to ATSB backed loans (is a federal judge going to short change the feds? unlikely in my opinion)
~ 119mil to US Airways creditors (I heard Parker say the Market Cap of the merged company would be $850mil, 14% of which is held by US Airways creditors)

So, that would again beg the question: How much are US Airways' assets worth?
Some of the numbers we've heard:
$110mil for MDA assets and commuter slots at LGA/DCA
$200mil for the Shuttle assets

[post="274613"][/post]​

I suspect that you are right that there will not be a comprehensive bid for assets that is capable of replacing the AWA deal. But let's muse over the numbers a bit.

I thought that the ATSB loan was paid down quite a bit -- to somewhere around $625 million IIRC, so you probably only need to get to around $800 million to equal the AWA deal. (Of course, many of the creditors want the planes in the sky, not in the desert and that is hard to value.)

Additional assets beyond those you've listed include:
Cash on hand (couple of hundred million after unraveling the recent financing)
LGA/DCA mainline slots (worth much more than the commuter slots)
Aircraft? (little, as they are mostly encumbered)
PHL (perhaps SW will pay for a dozen gates -- $60 million seems high)
CLT (maybe a network carrier --AA?-- will want to take it on as a hub, but unlikely to be worth more than $100 million)

That might get you above $800 million, but not much. Of course, it would be cash which is much more valuable than a stake in a new loss-making carrier. I guess it would depend on how much the creditors wanted the bird to be in the hand.

 

[firstamendment]

As someone who has been critical of Lakefield, I DO believe he has the best interest of the US employees. There will be NO better bid and this merger WILL go through. This is NOT the US of old and Lakefield and Parker have thought this through. It's called planning...something US never knew how to do. So all the naysayers need to know that it is ALL of US or none of US. Nobody is willing to top this deal and I will bet my life that there will be NO better offer. I DO trust Lakefield.

 

[BoeingBoy]

Just a couple of numbers....

ATSB-backed loans - total either $712 or $717 million (I forget which) of which only 90% is guaranteed by the ATSB. The other 10%, call it $71 million, is unsecured. Thus, either $641 or $646 million pays off the ATSB-backed portion of the loan.

The value of $850 million for the combined company comes from "new" stock that will be outstanding X $15 per share. Who knows what the stock will trade at if and when it becomes tradeable, but the unsecured creditors will get 14%, or about $122 million worth at $15 per share.

That's roughly $770 million to pay off the ATSB-guaranteed loan and get the unsecured creditors the same value (except they would get cash instead of stock).

Subtract the $500+ in cash on hand, and we're down to somewhere around $250 million for a liquidation to equal the HP/US deal as far as the ATSB and unsecured creditors are concerned - assuming that the stock the unsecured creditors will receive really will be worth $15 per share.

As others have said, there's the secured creditors to consider - how much is it worth to them to keep the planes flying as an orderly reduction is implemented versus having them all stop flying at once?

Jim

 

[TechBoy]

As others have said, there's the secured creditors to consider - how much is it worth to them to keep the planes flying as an orderly reduction is implemented versus having them all stop flying at once?

[post="274645"][/post]​

Then this would appear to be the problem. It would appear that enough cash could be raised to handle the unsecureds. So any bidder with a chance of success is going to have to try and deal with at least some of the planes. WN would need some more 737s if they were going to try to "occupy" PHL. B6 could use some 320s if they buy LGA/DCA slots. Anyone who tried run CLT as a hub would need some additional lift. But could these carriers take enough planes to keep revenues flowing to the lessors while they remarket the rest of the fleet. That is the $64k question.

 

[Winglet]

30 days should be enough time for potential bidders. I'm sure the other airlines have contingency plans for such an event that could be quickly put into play. But remember, this is American corporate business at it's worst. Lots of under-the-table crooked deals, payoffs, bribes, and cooperative courts.

One thing for sure, you can bet that U execs will walk away rich patting themselves on the back for putting the unions on their knees.

 

[SpinDoc]

One thing for sure, you can bet that U execs will walk away rich patting themselves on the back for putting the unions on their knees.

[post="274660"][/post]​

And that gets your panties in a bunch,
doesn't it?

While I don't necessarily agree with the
American business system, it is what
it is, and like I have said many times on
this forum:

YOU go out and get the same level
of education and business experience
as most corporate executives, and
then you can also share in the
wealth. Until then, find your niche
and do it the best you can.

 

[CaptianBoomer]

IMO, if there is a bid for all or part of U, it will come at the last minute.

If SWA jumps in, they will wait in the wings to see who falls out of the tree first, then they will top the offer at the last minute ala ATA.

It isn't over yet.

Boomer

 

[delldude]

IMO, if there is a bid for all or part of U, it will come at the last minute.

If SWA jumps in, they will wait in the wings to see who falls out of the tree first, then they will top the offer at the last minute ala ATA.

It isn't over yet.

Boomer

[post="274675"][/post]​

you are so right cap'n.......i don't see any bit of loyalty to the employees or the corporation as far as the creditors go.....i feel if they can get theirs....bingo....
but as you said and i agree it will come down to the final hour just like davey and the PIT leases. 😉 B) <_< <_<