Reuters News Article from 6 May 1998:
Judge applauds Pan Am buyout even as possible rival appears
By Michael Connor
MIAMI, May 6 (Reuters) - Pan Am Corp. (PAAN - news) Wednesday won hearty backing from a U.S. bankruptcy court judge for a $28.5 million buyout by a New England railroad company even as an investment group said it was readying a richer counterbid.
A lawyer for Wexford Management LLC, a Greenwich, Conn., operator of hedge funds, told the judge Wexford had tried in late April to open deal talks with Pan Am's managers and may yet make a counterbid for Pan Am's jets, name and route licenses by May 18.
U.S. Bankruptcy Judge A. Jay Cristol ordered Pan Am's managers to give Wexford's lawyers financial data and said he would consider any higher offer.
Cristol urged agreed-buyer Guilford Transportation Services and Pan Am's creditors to work quickly to complete their transaction and said he was deeply skeptical that a deal with better terms than Guilford's would appear.
"The court is extremely pleased with the amount of good faith being demonstrated in this case," Cristol said during a hearing. "If a higher and better offer does materialize, and I doubt it will, it is the duty of the court to consider it."
Since late February, when the discount airline filed for bankruptcy and ended scheduled flights, Pan Am has been futilely courted with proposed deals from financier Carl Icahn and others.
A discount carrier that bought the famed name of the aviation pioneer, Pan Am began business in 1996 and repeatedly changed routes and pricing strategies without finding a successful formula.
It also merged last year with another small carrier, Carnival Airlines, which was owned privately by the chairman of cruise-operator Micky Arison. Since February, it has laid off 1,200 workers, unloaded eight jets and operated as a charter with its three remaining jets.
The deal with Guilford, privately held and the operator of 1,600 miles of rail in New England, was reached last week and has been formally endorsed by all creditors expect main creditor NationsBank (NB - news).
NationsBank, owed some $26 million by Pan Am, would get just over $14 million from the all-cash Guilford deal and urged the judge to sign an order giving preliminary approval to the Guilford deal.
Only questions about NationsBank's rights on some real estate remain to be ironed out, NationsBank attorney Rodney May said.
"We're not yet on board for this deal, but we are trying to understand the issues," May said.
Besides giving tentative approval to a letter of intent from Guilford to buy Pan Am, Cristol authorized the immediate injection of $2 million by Guilford into Pan Am and scheduled another hearing on Pan Am for May 20.
Timothy Mellon, chairman and a founder of Guilford, told reporters after the court hearing that rival bids were possible but unlikely since none was likely to match his all-cash offer.
Other deals would almost certainly involve borrowing and those debt payments would make the on-going Pan Am a much less attractive business prospect, he said.
"We would be unlikely to raise our bid substantially," Mellon said. "The economics would not make much sense. We have been trying to develop a reasonable business plan."
Mellon said Guilford was eager to take control of Pan Am and hoped to return the airline to scheduled flight service, perhaps to selected Latin American cities and some in the United States.
Pan Am may also carry freight, possibly in combination with railroads, he said.
What does everyone see, potentially, for the resurgence of PAN AM??
Rory. |
