Two days after the US 11th-hour decision to select RSA



Two days after the US 11th-hour decision to favor RSA over TPG the decision was apparently based both on economics and a healthy dose of salesmanship.
The RSA offer exceeded turnaround firm TPG’s MOU by $40 million and eliminated $10 million in fees the Texas based firm would have received, making the spread between the two offers approximately $50 million.
The decision came less than 48 hours after US opposed the pension fund in a bankruptcy court filing, where the company said RSA “improperly and impermissibly†tried to derail the company’s reorganization plan. But people familiar with the behind-the-scenes talks between US CEO Dave Siegel and RSA CEO Dave Bronner said talks continued to proceed between the two new partners. In the end, the US board decided the RSA offer was too good to pass up even considering TPG’s airline turnaround experience. “Texas Pacific offered a world of airline experience, a great reputation and familiarity with US Airways’ upper management,†said a person close to the airline. “But Alabama was offering 25 percent more for the same stake, which was too much to ignore,†he said.
TPG had two “choices were to start a war or back off gracefully,†an industry consultant said. Reports indicate TPG did negotiate a side deal with US to be reimbursed for its expenses related to its proposed transaction and to receive an “indemnification arrangement†from the carrier.
While price was an important deal component, others said RSA's strategy to aggressively court the carrier and its unsecured creditors committee was a key factor. Reports indicate RSA sent a letter to US' creditors committee on Wednesday, September 18, the same day it presented its offer to US, and then arranged a meeting with the creditors to present its proposal. Creditor committee sources said more than 50 lender and debt holders attended the meeting on Monday, June 23 in Washington, where Bronner convinced committee representatives his proposal was superior. Another important point to obtain US management support is even though RSA will receive 5 of 13 board seats, Bonner told Siegel he does not intend to take an active role in running the airline.