U.S. judge approves US Airways restructuring

Todd B

Jan 11, 2003
Reuters:Tuesday March 18, 6:01 pm ET
ALEXANDRIA, Va, March 18 (Reuters) - A federal judge on Tuesday approved bankrupt US Airways Group Inc.''s restructuring plan that would see the carrier emerge from protection from its creditors by March 31.
Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia signed off on the plan after it received overwhelming support from creditors.
US Airways, the No. 7 airline, filed for bankruptcy in August. Its restructuring calls for a heavy reliance on regional jets, a revamped route structure and a $900 million loan guarantee from the federal government.
In his ruling from the bench, Mitchell did not address the airline''s dispute with its pilots over a restructuring of their pension plan. He has previously directed the company to resolve the dispute with the pilots.


Aug 20, 2002
Alexandria, Virginia, March 18 (Bloomberg) -- US Airways Group Inc., the largest U.S. airline east of the Mississippi River, won a federal judge''s approval of a plan designed to let the carrier exit Chapter 11 by the end of the month.

U.S. Bankruptcy Judge Stephen Mitchell accepted a recovery plan that lets the seventh-largest U.S. airline hand over ownership to its creditors and eliminates more than $10 billion in debt. The Arlington, Virginia-based airline filed for bankruptcy protection in August as losses widened after the Sept. 11 terrorist attacks.

``This is a very important milestone'''' on the road to a March 31 deadline for getting out of bankruptcy, Chief Executive Officer David Siegel told reporters after the court hearing. ``We emphasized this date since the beginning of the case and we''ve maintained that timeline throughout.''''

Among the hurdles remaining for US Airways is resolution of its bid to end a $2 billion pension plan. The carrier wants to turn the pension obligations for 7,000 people over to the Pension Benefit Guaranty Corp., a federal corporation that oversees retirement plans. The company also is negotiating to find a new processor to handle ticket sales made with credit cards.

Government Loan

``We absolutely have to wrap up the pension issue, the credit card issue and the remaining issues on the ATSB loan,'''' Siegel said, referring to The U.S. Airline Transportation Stabilization Board, which was established to aid carriers after the Sept. 11 attacks. The company has to come out of bankruptcy to get a $900 million government loan guarantee that will help US Airways raise $1 billion to fund post-bankruptcy operations.

The recovery plan approved today would give Alabama''s state pension fund 37 percent of the company''s new shares, the Air Line Pilots Association 19 percent, other workers 11 percent and management 8 percent. Bondholders and other unsecured creditors would own 11 percent of the new shares, representing about a 2 percent recovery of their claims. Existing shareholders would get nothing.

General Electric Co.''s GE Capital Corp. unit, a top creditor, will provide financing for the carrier to buy regional jet aircraft and will receive 5 percent of the reorganized airline''s new shares, according to the plan filed Dec. 21 in U.S. Bankruptcy Court in Alexandria, Virginia.

The Airline Transportation Stabilization Board has conditionally approved the $900 million loan guarantee. As a result, the U.S. government stands to own 10 percent of the reorganized carrier.

`Only Currency''

``The only currency available to pay unsecured creditors is equity in the reorganized company,'''' Mitchell said while ruling on the plan. ``Confirmation of the plan is not likely to be followed by liquidation or further need for reorganization,'''' he said.

Retirement Systems of Alabama, the state''s pension fund led by David Bronner, will pay $240 million for its stake. The fund also is providing $500 million in bankruptcy financing and renegotiating about $340 million of bond debt related to US Airways'' aircraft. It will select eight members of a new 15-member board that will include Bronner and Rono Dutta, a former president of United Airlines parent UAL Corp.

Other board nominees include Hans Mirka, an airline executive; John A. McKenna, an adviser to Bronner from investment bank Houlihan, Lokey, Howard & Zukin; and William Stephens, the Alabama pension fund''s head lawyer.

US Airways will issue 51 million Class A shares and 5 million Class B shares when it emerges from Chapter 11. Retirement Systems of Alabama will hold all of the Class B shares and will have about 70 percent of total voting power.

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