US Airways' disclosure statement approved; plan confirmation hearing set for Sept. 15

By Caroline Salls

Pittsburgh, Aug. 9 - US Airways Group, Inc.'s disclosure statement for its plan of reorganization was approved Tuesday by the U.S. Bankruptcy Court for the Eastern District of Virginia, according to a company news release.

The company plans to emerge from Chapter 11 and complete its merger with America West Airlines in late September or early October, the release said. A hearing on confirmation of the plan is scheduled for Sept. 15.

"Today's decision by the court approving our business plan was critical to our efforts to emerge from Chapter 11 and complete our merger with America West Airlines," Bruce R. Lakefield, US Airways' president and chief executive officer, said in the release.

Under the plan, unsecured creditors holding claims of $50,000 or less will receive a cash payment of 10% of the amount of their claim.

Other unsecured creditors will receive 30% of the unsecured creditors' stock in the reorganized company. The value of their recoveries will depend on the value of the shares of stock at emergence, as well as the total amount of allowed claims, including the amounts of disputed claims that have not yet been determined.

Their recovery is expected to be between 3.1% and 17.4%. These claims are estimated to be between $408.5 million and $1.24 billion.

US Airways has received commitments on $565 million in new equity investment and participation by suppliers and business partners that, together with the new equity, are expected to provide the company with $1.5 billion in liquidity.

The new investors are: ACE Aviation Holdings; Eastshore Aviation; Par Investment Partners; Peninsula Investment Partners; a group of investors represented by Wellington Management Co. and a group of investors represented by Tudor Investment Corp.

US Airways and America West will merge to create the first full-service, low-cost nationwide airline. The airlines will operate under the US Airways brand and will be based in Tempe, Ariz.

America West will become a wholly owned subsidiary of the reorganized group, and the existing shareholders of America West will receive about 37% of the new common stock of the reorganized group.

Also under the plan, the reorganized group may conduct a stock offering to purchase up to $150 million in shares of new common stock to some US Airways creditors, a portion of which may be offered to existing common stockholders of America West.

US Airways, an Arlington, Va.-based airline, filed for bankruptcy on Sept. 12, 2004. Its Chapter 11 case number is 04-13819.

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