As reported in News & Developments, TWA has filed for Chapter 11 bankruptcy in conjunction with a takeover offer bid from American Airlines, Inc.
Under the proposed deal, American is to pay $500 million and assume around $3 billion of TWA's aircraft lease debts. In addition to this it is advancing $200 million in emergency financing to help get TWA through bankruptcy.
The agreement between TWA and American, which is the second-largest carrier in the United States, is subject to a number of conditions, one of which is approval by the Bankruptcy Court.
TWA hasn't turned a profit since 1988 and has filed for bankruptcy twice before. Reports suggest that the airline lost $115.1 million in the first nine months of 2000 after losing $353 million in 1999. Despite this, TWA was still, in 1999, the eighth-largest carrier, measured by passenger miles, in the United States. The company employs 20,000 staff, and American has pledged to offer jobs to all 17,600 unionized workers, including 2,300 pilots, and to some managers.
A bankruptcy hearing is scheduled for March 9.
Competing bids are required by February 28. If they exceed American's, American will be entitled to a break-up fee of $55 million. Two potential bidders are Jet Acquisitions Group Inc., which intends to keep TWA together along with its employees, with a bid of $1 billion, and Global Airlines Corporation, which has not yet announced a bid figure.
TWA is being represented, on the bankruptcy side, by lead counsel James Sprayregen and his team at Kirkland & Ellis in Chicago. Other lawyers working on the Chapter 11 file are Marc Kieselstein, David Seligman and Marc Carmel. Kirkland & Ellis is also providing a host of other advice to TWA: William S. Kirsch, Willard G. Fraumann, James S. Rowe and Kevin R. Davis are providing corporate advice; Andrew M. Kaufman and Elizabeth A. Davidson are advising on secured transactions; and Alexander Dimitrief, Michelle H. Browdy and Renee D. Honigberg are dealing with litigation.
TWA has retained Gerald Rosenfeld, David Resnick and Noah Roy of Rothschilds for financial advice.
Among TWA's main creditors is Boeing, whom TWA owes $6 million in aircraft lease payments.
The city of St. Louis is also listed as a creditor, along with two unions, the International Association of Machinists and the Airline Pilots Association.
Unsecured creditors include First Security Bank, which is acting as trustee to $150 million of unsecured bonds. Tom Biron of Blank Rome Comiskey & McCauley in Philadelphia is acting for the unsecured creditors' official committee. Financial advisor to the committee is Loeb Brothers in New York.
Reprinted with permission from Global Insolvency & Restructuring Review, March/April 2001.