Northwest granted approval of Mesaba, Mair stock purchase and reorganization settlements

By Caroline Salls

Pittsburgh, Feb. 27 - Northwest Airlines Corp. obtained court approval of settlements with Mesaba Aviation, Inc. and its parent Mair Holdings Inc. that allow Northwest to enter into a stock purchase and reorganization agreement under which it will buy Mesaba's operations, according to Tuesday filings with the U.S. Bankruptcy Court for the Southern District of New York.

Northwest will receive a $7.3 million general unsecured claim against Mesaba, and Mesaba's operations will become part of Northwest.

Mesaba, in turn, will receive an allowed $145 million general unsecured claim against Northwest.

The Mesaba settlement resolves all disputes between Northwest and Mesaba and will allow Northwest to continue to operate Mesaba.

Specifically, the stock purchase and reorganization agreement provides that all Mesaba equity will be canceled and that Mesaba will issue and sell to Northwest 1,000 new shares of Mesaba common stock.

As consideration for the transactions, Mesaba agreed to grant Northwest the $7.3 million allowed general unsecured claim, and Northwest agreed to grant Mesaba a $145 million allowed general unsecured claim.

Northwest has also agreed to pay up to $10 million to Mesaba to assure the payment of some allowed administrative expenses in the Mesaba case.

Also, unless Mair has breached its obligations under the agreement between Northwest and Mair, Northwest will allow Mesaba to use up to $4.5 million of its cash to pay for amounts necessary to cure defaults under some of Mesaba's contracts.

According to the Mair settlement motion, Northwest and Mair have agreed that Northwest will sell to Mair all of its shares of Mair's common stock and cancel a warrant to purchase additional shares of Mair's common stock.

Mair, in turn, has agreed to consent to and fully support the stock purchase and reorganization agreement and vote in favor of the Mesaba plan.

Upon closing of the stock purchase and reorganization agreement, Northwest will assign to Mair its claim in Mesaba's bankruptcy case that will be allowed under the agreement.

Mesaba, an Eagan, Minn.-based Northwest Airlines affiliate, filed for bankruptcy on Oct. 13, 2005 in the U.S. Bankruptcy Court for the District of Minnesota. Its Chapter 11 case number is 05-39258.

Northwest, an Eagan, Minn.-based airline, filed for bankruptcy on Sept. 14, 2005. Its Chapter 11 case number is 05-17930.

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