Section 1113

M

michael707767

Senior
Aug 21, 2002
332
0
[blockquote]
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However, in the case of US Airways I have only seen threats to liquidate if new agreements are not ratified. Why wouldn't US Airways also pursue a Sec. 1113 action in lieu of liquidation?

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[/blockquote]

Because it was a bluff. The company had all the concessions they needed. They knew that the court would not approve more, because its insane. They should have enough concessions on the table. So, it was a no loose proposition for them. Threaton to shut down, and see if you can scare some more money from the labor groups.
 
I think U actually did file a 1113 motion, but never had to actually exercise relief from it. Most of the U bargaining units also had/have S 1113 side letters, wherein the company basically promised not to ask for anything more via 1113 (I don't know how ironclad these are, but I digress).[BR][BR]UAL is filing for a 1113 motion, presumably so that if negotiations go nowhere as their DIP starts to run dry, they can immediately ask the court to abrogate contracts. Or so one would assume.
 
First, my heart goes out to all of the US Airways employees. All of you are facing some very difficult decisions in the coming weeks.
If you don''t mind a question from an outsider, I am curious why I have seen no discussion about a Section 1113 petition from your Company. For those of you who are not familar with this section of the bankruptcy code, the Company can petition the Court to impose certain contractual changes (or void the CBA''s completely) if a negotiated settlement is not reached with employees. UAL management has already stated that they will proceed with a Sec. 1113 action on Dec 26th if agreements have not been reached with its unions. However, in the case of US Airways I have only seen threats to liquidate if new agreements are not ratified. Why wouldn''t US Airways also pursue a Sec. 1113 action in lieu of liquidation?
I am not promoting this course of action, but I am surprised that I have not seen it discussed. If anyone could enlighten me on the subject, I would appreciate it.
Thank you and God bless,
Andy S.
 
Section 1113 letters are in all labor contracts from the first round of concessions. The company agreed after the first round of concessions not to seek further cut in court nor support anyone else seeking further cuts thru the court system. Since 1983 when Congress enacted 1113 and 1114 no judge has ever overturned a section 1113/14 letter in court. AMR tried last year to seek further cuts from the TWA employees who all ready agreed to concessions and had 1113 protection letters in their agreements and the judge said no.[BR][BR]Here is language from the Sept concessions contract from the mechanic and related group:[BR][BR]
[P]The Company agrees that if a petition for bankruptcy is filed with respect to either US Airways Group, Inc. or US Airways, Inc., during the calendar year 2002 (the "Filing"):[/P]
[P align=justify][/P]
[OL]
[LI]Neither the Company nor any affiliate will file or support any motion pursuant to 11 U.S.C. Sections 1113, 1113 (e), 1114, 1114 (h) or any other provision of the Bankruptcy Code, seeking rejection or modification of, or relief or interim relief from, the IAM Restructuring Agreement.(a "Motion"). [BR][BR][/LI]
[LI]The Company and its affiliates will actively oppose any such Motion if filed by another party.
[LI]It is expressly recognized and agreed that if the IAM Restructuring Agreement is not completely and unconditionally effective, and the 1995 Mechanical and Related Agreement therefore remains effective without the Modifications, the above two paragraphs are inapplicable and have no force or effect, and the Company may make or refrain from opposing any such Motion with regard to the 1995 Mechanical and Related Agreement. [/LI][/OL]
[P align=justify][/P]
[P] [/P]
[P]In the event that the Company files a petition for bankruptcy and US Airways determines to request additional modifications to the IAM Restructuring Agreement to support reduced cash flows, to secure debtor-in-possession financing, and/or attract capital, the Company and IAM will meet to negotiate regarding such additional modifications to the mutual satisfaction of both parties within fifteen days of such determination. Neither party will be required to reach agreement regarding such modifications and the failure to reach such agreement will not affect the commitments in this letter.[/P]
 
[P]
[BLOCKQUOTE][BR]----------------[BR]On 12/21/2002 9:49:34 PM flyonthewall wrote:
[P]Under Bankruptcy law, a company has to give 14 to 21 days notice for a hearing and the judge has up to 30 days after that hearing to decide whether to abrogate the labor contracts. US Airways deadline is January 16, 2003, because that is the day that the judge rules on the POR. [BR][BR]This is why if any labor union doesn't pass the concession ratification, liquidation will most likely be the next step in January. To the NO voters, I hope that you enjoy your last month at work![/P]----------------[/BLOCKQUOTE]
[P][/P]Wrong fly,that only applies to an intial request and here is the language from the section 1113, it was set up because of Lorenzo and CO's BK in 1982:[BR][BR]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3][FONT color=#000000]also went over all the procedures and steps in the bankruptcy codes.[SPAN style="mso-spacerun: yes"] [/SPAN]One item covered in depth is the 1113 letter, which refers to the section of code that ensures that a company negotiates with the union before they seek abrogation of the labor agreement.[SPAN style="mso-spacerun: yes"] [/SPAN]When a company seeks protection, the agreement remains in effect.[SPAN style="mso-spacerun: yes"] [/SPAN]When a union negotiates an 1113 letter it secures an agreement with the company showing that the company will not seek further cuts from labor.[SPAN style="mso-spacerun: yes"] [/SPAN]To this date, no company that has had an 1113 letter negotiated has ever asked the court to abrogate it.[?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:eek:ffice:eek:ffice" /][o:p][/o:p][/FONT][/FONT][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3][FONT color=#000000] [o:p][/o:p][/FONT][/FONT][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3][FONT color=#000000]Companies that request abrogation of the labor agreement but it must meet the following nine (9) distinct requirements:[o:p][/o:p][/FONT][/FONT][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt"][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3][FONT color=#000000] [o:p][/o:p][/FONT][/FONT][/SPAN][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]1.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The debtor in possession must have made a proposal to the union.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]2.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The proposal must be based upon the most complete and reliable information available at the time of the proposal.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]3.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The modification must be necessary to permit reorganization.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]4.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The modification must provide that all affected parties be treated fairly and equitably.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]5.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The debtor must provide the union with such relevant information as is necessary to evaluate the proposal.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]6.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The debtor must have met with the collective bargaining representative at the reasonable times subsequent to making the proposal.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]7.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The debtor must have negotiated with the union concerning the proposal in good faith.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]8.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The union must have refused to accept the proposal with good cause.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
[P class=MsoNormal style="MARGIN: 0in 0in 0pt 1in; TEXT-INDENT: -0.25in; mso-list: l0 level1 lfo1; tab-stops: list 1.0in"][FONT color=#000000][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]9.[/FONT][SPAN style="FONT: 7pt 'Times New Roman'"] [/SPAN][/SPAN][SPAN lang=EN style="mso-ansi-language: EN"][FONT size=3]The balance of the equities must clearly favor rejection of the agreement.[o:p][/o:p][/FONT][/SPAN][/FONT][/P]
 
Under Bankruptcy law, a company has to give 14 to 21 days notice for a hearing and the judge has up to 30 days after that hearing to decide whether to abrogate the labor contracts. US Airways deadline is January 16, 2003, because that is the day that the judge rules on the POR.

This is why if any labor union doesn't pass the concession ratification, liquidation will most likely be the next step in January. To the NO voters, I hope that you enjoy your last month at work!
 
Flyonthewall:

Iti s my understanding from ALPA Legal, your explanation of a Bankruptcy S.1113 hearing timeline is accurate. Due to the company's current liquidity position, there is no time for management to pursue the S.1113 legal process; therefore, it's not an option for the Company.

During the first round of concessions the company had the time to seek contract changes through the court, but that is not the case due to liquidity. If the company does not get all labor agreements ratified by the January 16 Omnibus Hearing, the airline will likely liquidate before the end of January.

However, with today's news that RSA and Unsecured Creditors Committee both are expected to formally endorse the POR at or prior to the January 16 hearing, on the adequacy of the Disclosure Statement, the potential for "fast track" emergence is likely provided all new labor accords are ratified.

Chip
 
To all:

Thanks for the explanations. So instead of being threatened with 1113, the unions are being threatened with liquidation - did I get that right? If that is the case, was there any benefit to getting the 1113 side letters?

I'm still confused about the rush. Didn't the Court extend the deadline for filing the POR to something like Jan 31st? The ATSB has already given conditional approval, but I'm not aware of a deadline. Is there a deadline in the DIP financing? Why would the Court extend the POR filing if there was an earlier drop dead date? I'm sorry, but something doesn't seem to be adding up.

Finally, there is the issue of the PBGC approval (or lack of same). What are the realistic options here? Can't they just terminate the pension plan? Not pretty, but the alternative seems worse.

Once again, my prayers are with all of you.

fraternally,

Andy S.
 
Bob, I don't drink and do not go to bars, so your feable attempt at humor did not work. And thank you for the compliment, I did major in pre-law
 
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