A wrecker's mustard yellow claws ripped out an awning at Detroit Metro Airport's vacant Davey Terminal to a round of applause on Monday.
But the airline that once called the big beige Davey home still owes millions of dollars in debt on the terminal.
Northwest Airlines Corp., which filed for Chapter 11 bankruptcy last month, is paying off $83.4 million in bonds sold 20 years ago to fund improvements to the Davey.
If Northwest, which had been losing an average of $4 million a day before filing for bankruptcy, decides not to pay down the debt, investors could receive cents for every dollar they invested in the bonds.
The $90.5 million in bonds were sold in 1985, a year after Republic Airlines made the Davey its hub, to pay for projects such as an underground fuel system, a flight kitchen and other projects, said Northwest spokesman Kurt Ebenhoch. Bondholders were warned in 1985 that the terminal would be torn down eventually, Ebenhoch said. In 1986, Republic and Northwest merged, and Eagan, Minn.-based Northwest inherited the debt.
Northwest, which grew too large for the Davey, moved in to the $1.2-billion McNamara Terminal in 2002.
Northwest's payments on the Davey bonds amount to $100,000 a year and would culminate in an $82-million payment when the bonds mature in 2015, said Carla Sledge, chief financial officer for Wayne County, which sold the bonds for Republic.
That final payment would be an obvious drain on Northwest. Ebenhoch said he wouldn't speculate if Northwest would try to dump the debt.
But companies often try to erase or reduce this kind of debt through the bankruptcy process, said John Weiss, partner and cochair of the bankruptcy practice at Katten Muchin Rosenman LLP in Chicago. If Northwest stops making payments on the bonds, which are due every December, investors who hold these bonds could be considered unsecured creditors. Unsecured creditors typically receive cents for every dollar they're owed in bankruptcy cases.
Sledge said neither Wayne County nor the Wayne County Airport Authority would be on the hook if Northwest defaulted.
The Davey is coming down along with the vacant Marriott Hotel to make room for the new, 26-gate North Terminal that would house Spirit Airlines, Southwest and other airlines.
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"I am significantly more optimistic that we will be able to pay creditors in full," Robinson said.