(COMTEX) B: TWA Weighs Independent Funding, Takeover Options
B: TWA Weighs Independent Funding, Takeover Options
Mar 06, 2001 (The Dallas Morning News - Knight Ridder/Tribune Business News via
COMTEX) -- The future of Trans World Airlines Inc. remained unclear Monday after
financier Carl Icahn offered to fund a plan that would keep the struggling
carrier operating independently.
An auction at which TWA's board of directors would decide the "highest and best"
bid for the airline was adjourned early Monday afternoon in New York. It will
resume Wednesday evening.
TWA filed for bankruptcy protection in early January as part of a $3.5 billion
plan to be acquired by Fort Worth-based AMR Corp., the parent company of
American Airlines Inc.
Although AMR's bid for the nation's eighth-largest carrier was the only one that
met all the guidelines of the bankruptcy court, TWA's lawyers are still
considering other offers, said TWA spokesman Mark Abels. Under rules set by the
court, all competing bids for the carrier were due Wednesday.
"We are taking a few more days to evaluate what these other parties are willing
to offer," Mr. Abels said. "We don't have a resolution yet."
Mr. Icahn, who ran TWA from 1985 to 1993, is seeking to preserve a lucrative
ticket contract that allows his Lowestfare.com Web site to purchase TWA tickets
at a discount of 45 percent. AMR's top executives have said that the company
won't honor the money-losing contract if it gains control of TWA.
Mr. Icahn's group, called TWA Acquisition Corp., offered Monday to provide TWA
with a $325 million loan in lieu of a $200 million one from AMR that has kept
TWA operating since it filed for bankruptcy. The group also plans to invest an
additional $325 million in the carrier.
AMR's bid consists of the $200 million loan, $300 million in cash and the
assumption of $3 billion in debt for aircraft operating leases.
"We think we have the only legitimate bid, and met all the rules the court had
laid down," said AMR spokesman John Hotard. "We also understand that much of
this will be decided in bankruptcy court on Friday."
After the auction is completed, TWA's lawyers will make its recommendation to
U.S. Bankruptcy Judge Peter Walsh at a hearing Friday in Wilmington, Del. The
judge will make the final decision.
Under Mr. Icahn's plan, 70 percent of the re-organized airline would be owned by
its unsecured creditors, which include Mr. Icahn. TWA's labor unions would hold
another 10 percent to 20 percent of the airline's stock. It was unclear who
would own the remainder.
The unsecured creditors committee said Monday through Mr. Icahn's group that it
plans to file objections to AMR's bid because it doesn't ensure some recovery to
each of the airline's unsecured creditors. AMR is still working out the terms
for how much TWA's secured and unsecured creditors would receive under its
offer, said James Sprayregen, a TWA bankruptcy lawyer.
He and other TWA lawyers also are working to resolve the creditors' objections
to AMR's offer before the Friday hearing, Mr. Sprayregen said.
If Mr. Icahn's bid is selected, TWA would be run by David Treitel, chief
executive of Simat Helliesen & Eichner Inc., a New York-based aviation
consulting firm. Mr. Treitel would report to Mr. Icahn.
Mr. Icahn, who attended Monday's auction, said his bid would require concessions
from TWA's unions. The bid is being put together by investment banker Brian
Freeman. Fifteen years ago, TWA's largest union, the International Association
of Machinists and Aerospace Workers, hired Mr. Freeman as a financial adviser.
However, the union has said it no longer has any ties with Mr. Freeman and will
not support or cooperate in any bid by Mr. Icahn. The unions have said they
widely view Mr. Icahn's past decisions while owner of TWA as the source of
current financial problems.
Mr. Icahn's group also includes Ralph Hellmold, chairman of The Private
Investment Banking Co., a New York firm that provides advice on financial
restructuring and acquisitions to middle market and emerging growth companies.
Other bidders include Global Airlines Inc. and Jet Acquisitions Group Inc.
Jet Acquisitions has yet to deliver a $50 million deposit required as part of
the bidding process, Mr. Abels said. The company, based in Scottsdale, Ariz., is
headed by Skywest Airlines founder J. Ralph Atkins and largely funded by an
obscure investment banker in Portland, Ore.
Jet Acquisitions has offered to pay $889 million as part of a $6.3 billion deal
for the airline. "We are still in the bidding process," said Sean Mendis, a
spokesman for the group. He would not comment about the lack of a deposit.
Global Airlines said Monday that it wasn't willing to pay the $50 million
deposit until it is selected as the winning bid. Headed by Los Angeles investor
Emil Bernard, Global Airlines unsuccessfully attempted to buy TWA twice last
year and is offering to pay $450 million for some of the airline's assets.
TWA is rapidly running out of the $200 million it borrowed from AMR. TWA's
bankruptcy lawyers filed a motion Monday asking the bankruptcy court for
permission to borrow an additional $130 million. The matter will be decided at
the Friday hearing.
By Katherine Yung
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