US Airways Group Issues Proxy Filing

ARLINGTON, Va. (AP) -- America West shareholders and US Airways creditors who are bullish on the prospects of the airlines' proposed combination will have an opportunity to invest in the new airline at a cost of $16.50 per share.

US Airways Group Inc. issued a proxy filing Wednesday announcing a rights offering of up to 9.1 million shares for interested America West shareholders and US Airways creditors.

US Airways and America West, the nation's seventh and eighth largest airlines respectively, announced plans to merge last month. The airline will keep the US Airways name but its headquarters will be located in Tempe, Ariz., home of America West. The chief executive will be America West CEO Doug Parker.

The merger still needs approval from some federal regulators, America West shareholders and the judge presiding over US Airways' bankruptcy.

The $16.50 price per share is based on the $150 million paid by the most recent investor in the merger, Boston-based Wellington Management Co., which received about a 15 percent stake in the company in return for its investment.

On a fully diluted basis, the new company would issue 82.8 million shares. Valued at $16.50 a share, that would give the new airline a market capitalization of about $1.37 billion. That compares to a market cap of about $215 million for America West parent America West Holdings Corp.

Besides the rights offering, America West shareholders will receive 0.4125 shares in the new company for each existing America West share if they approve the merger. Holders of existing US Airways shareholders will not receive any shares in the new company and will likely be wiped out as part of the airline's bankruptcy reorganization.

If the $16.50 per-share price holds up, existing America West shares would be worth $6.81 per share when the merger is completed. That would be a 15 percent premium over Wednesday's $5.94 closing price.

A proxy filing issued Tuesday by Arlington-based US Airways, though, warns investors that there is no way to know what shares will be worth when public trading begins.

The airline said in regulatory filings that it hopes for public trading in the new company to begin in the second half of 2005.

Also, a proxy filing issued Tuesday indicates that two government agencies will likely hold more than a 15 percent stake in the new airline.

The federal Air Transportation Stabilization Board would hold an 11 percent to 12 percent stake in the new airline, according to the proxy. The ATSB, a federal agency created after the Sept. 11 attacks to provide aid to ailing carriers, loaned more than $1 billion combined to the two carriers.

Also, the federal Pension Benefit Guaranty Corp. is expected to receive at least a 5 percent stake in the airline. The PBGC is US Airways' largest creditor after the agency took control of the airline's underfunded pension plans.

US Airways creditors are collectively expected to receive about a 12 percent stake in the company, but the exact amount each creditor will receive has not yet been determined. In the proxy filing, US Airways said it expects the PBGC to emerge with a stake greater than 5 percent.