Northwest Can Begin Plan Vote Process

Northwest Airlines can begin seeking creditor approval of a plan to exit bankruptcy that values the company at an estimated $7 billion, a judge ruled Monday.

The decision puts the airline in the last stages of bankruptcy before it can emerge from court protection.

U.S. Bankruptcy Judge Allan Gropper said that once Northwest revises its disclosure statement to incorporate agreements reached Monday, the statement could be released to creditors along with a restructuring plan.

Eagan, Minn.-based Northwest Airlines Corp. wants to cancel all existing shares in the company and issue 272 million new ones, with a stock offering to sell 27.78 million shares at $27 a piece.

Another hearing will be held this week to determine whether an examiner will be appointed to investigate merger discussions that may have taken place with Northwest, Gropper said. A reorganization plan could be mailed to creditors as early as April 6.

A hearing to confirm the company's reorganization plan is scheduled for May 16.

Two of the company's labor unions, the Association of Flight Attendants and Air Line Pilots Association, as well as certain shareholders and bondholders had objected, arguing that the disclosure statement did not provide enough information.

The unions complained that Northwest was not disclosing the terms of a stock grant plan for 400 top managers. At the judge's instruction, Northwest consulted Securities and Exchange Commission lawyers, who approved the airline's plan to wait until 20 days before the voting deadline to release more details.

An ad hoc committee of shareholders was the only remaining objector on Monday. The group has had a lead role in securing an examiner to investigate any merger talks that may have occured.

The ad hoc equity committee believes the airline is worth more than it says and has accused Northwest of "parking" any deals with other airlines until after it emerges from court protection.

Under Northwest's plan, secured creditors would be fully paid, and unsecured creditors would get about 74 cents on the dollar. Current shareholders would get nothing.

Northwest filed for bankruptcy in September 2005.

Also Monday, Northwest Airlines said it will give 4,000 non-union employees $77.4 million in cash and stock as part of a bonus program after the airline emerges from bankruptcy, an attorney for Northwest said Monday.

The employees, who took pay and benefit cuts as the company reorganized, would get 40 percent of the bonus as cash when the company emerges from court protection, lawyer Bruce Zirinsky said in court.

The remaining 60 percent would be issued as new common stock in the company one year later, as long as the employee is still with the company.

Zirinsky said the total amount of the payout was roughly calculated using a formula under which Northwest calculated claims that have been given to its labor unions.

He also announced that flight attendants and certain workers represented by the International Association of Machinists could receive a claim of an undisclosed amount, partially restoring pay and benefits that the company extracted earlier. The company and union supported the move, and it will be considered in an hearing to be scheduled soon.

The IAM claim, estimated by the union to be worth $212 million today, would replace special Northwest shares issued as part of a 1993 deal when IAM workers made concessions in an effort to help the airline stay out of bankruptcy.


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