US Airways gets court OK for PBGC claim settlement agreement

By Caroline Salls

Pittsburgh, Sept. 2 - US Airways, Inc. obtained court approval of its claims settlement agreement with the Pension Benefit Guaranty Corp. that pays the PBGC $13.5 million in cash and a $10 million note and gives it 70% of the unsecured creditors common stock in the reorganized company.

According to US Airways' motion, the payments under the agreement comprise what the company considers the priority portion of PBGC's more than $13 billion claim, according to the order filed Friday with the U.S. Bankruptcy Court for the Eastern District of Virginia.

The $13.5 million payment will be made when US Airways' plan of reorganization takes effect.

The $10 million note will be payable over seven years and will carry an interest rate of 6%.

The common stock provision is intended to give other unsecured creditors more than a proportional recovery if the size of non-PBGC claims is ultimately determined to be less than $1.1 billion.

In that event, holders of PBGC's unsecured claims would be entitled to more than 70% of the unsecured creditors' stock.

If total claims are determined to be greater than $1.1 billion, unsecured creditors' recoveries will be diluted.

Also under the agreement, the PBGC has agreed to support confirmation of the plan of reorganization, will not participate in the stock rights offering under the plan and has agreed not to sell its stock for five months.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.