A judge on Tuesday approved a $1.38 billion debt refinancing plan by Northwest Airlines, which is restructuring in an attempt to emerge from bankruptcy protection.
Judge Allan Gropper approved the company's motion to refinance an existing $1.125 billion (euro0.88 billion) loan and to take an additional $250 million (euro195 million) in debt so Northwest Airlines Corp. can have greater liquidity. He called it a "highly beneficial transaction" that would help the company on its way to be healthy and competitive.
The loan, Northwest argued in a court filing, "will enable the debtors to continue financing their operations, pay their employees, vendors and suppliers, and operate their businesses at a substantially reduced cost, thus preserving and enhancing the value of the enterprise for the benefit of all parties-in-interest."
The refinancing would save Northwest about $34 million (euro26.58 million) a year in interest payments and another $900 million (euro701 million) in debt repayment through 2010, the company wrote in a filing.
All objections that had been filed were withdrawn or deferred to be discussed at a later hearing. The Pension Benefit Guaranty Corporation and JPMorgan Chase Bank were among those objecting to the loan deal, which was done with Citigroup Inc.
Northwest also asked the court for approval to convert the loan into exit financing once it completes its restructuring plan to emerge from bankruptcy. Before completing its reorganization plan, the company must resolve its pension funding obligations.
The airline returns to court Wednesday morning in a hearing that could determine whether its 9,000 flight attendants will strike. The airline seeks an injunction to stop a strike by the flight attendants, represented by the Association of Flight Attendants.
The AFA said it has the right to strike since the airline imposed new contract terms on Aug. 1. The flight attendants, who switched to the AFA last month, have rejected two agreements that were reached in negotiations with the airline.
Northwest imposed contract terms that were similar to those outlined in the first agreement that was rejected by the flight attendants. In turn, the union is asking the judge to impose the terms from the second agreement instead. Both deals call for $195 million (euro152 million) in concessions.
Northwest, the fifth-largest U.S. airline, filed for bankruptcy protection on Sept. 14, 2005.
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NEW YORK_A judge on Tuesday approved a $1.38 billion (€1.07 billion) debt refinancing plan by Northwest Airlines, which is restructuring in an attempt to emerge from bankruptcy protection...
The union wants Northwest to trim concessions to $156 million because the airline is doing better than it projected.
Judge Allan Gropper had to weigh the issue of whether the rejection of the contract violated non-bankruptcy labor laws, and therefore gave the flight attendants the right to assert their claim.
Before the plans are implemented, flight attendants must approve the deal.