Aloha Airlines faces a last-minute snag in its plans to emerge from bankruptcy this week. The company says further delay could shut down the airline.
The Pension Benefit Guaranty Corp., the federal agency that insures pension plans, has notified the U.S. Bankruptcy Court that it will appeal confirmation of Aloha's reorganization plan in court.
Aloha had planned to terminate four of its employee pension plans Wednesday and to emerge from bankruptcy Thursday.
U.S. Bankruptcy Court Judge Robert Faris on Nov. 29 approved the reorganization plan to bring Aloha Airlines out of bankruptcy, right after the company reached a tentative contract agreement with its pilots.
Under the plan, supermarket chain owner Ron Burkle and former pro football star Willie Gault and the owners of the airline, the Ching and Ing families, are to recapitalize the company with a combination of $50 million in equity and up to $50 million in debt financing.
An emergency hearing on the pension appeal is scheduled in the court Tuesday.
Aloha said in a court filing Friday that the delay would jeopardize the plan to exit bankruptcy.
The financial obligation of the lead investor, Burkle's Yucaipa Cos. LLC, depends on the company coming out of bankruptcy Thursday, the airline said, adding that its major lender's line of credit also expires on that day.
The appeal "imperils restructuring" and the airline's "very existence," the Aloha statement said.
"Permitting the PBGC to prosecute its appeal 'in the ordinary course' will likely result in the cessation of the business and the shutdown of the airline," Aloha said.
The agency is obligated to pay much of Aloha's pension obligations if the pension plans are terminated.
Information from: Honolulu Star-Bulletin, http://www.starbulletin.com
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