US Airways reorganization plan confirmed, could emerge, close merger as soon as Sept. 27

By Caroline Salls

Pittsburgh, Sept. 16 - US Airways, Inc.'s plan of reorganization was approved Friday by the U.S. Bankruptcy Court for the Eastern District of Virginia, according to a company news release.

The confirmation clears the way for the US Airways-America West Airlines merger transaction to formally close as soon as Sept. 27, the release said. Under the terms of the merger agreement, the transaction can close on the 11th day following plan confirmation.

"Through our restructuring, we have reduced our debt, improved our liquidity and strengthened our balance sheet," US Airways president and chief executive Bruce R. Lakefield said in the release.

"With the financial position of other carriers deteriorating, we are pleased that we will have a very strong cash position, a robust business plan, a low cost structure, and a strong network that offers our customers an attractive product and more choices."

Lakefield said in the release that the company's full attention now will be on the completion of the merger, the implementation of consistent customer service offerings, the building of a unified corporate culture, and the transfer of headquarters functions to Tempe, Ariz.

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.

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.

America West chairman, president and chief executive officer Doug Parker will assume those same responsibilities at the merged company, with Lakefield serving as non-executive vice chairman of the board of directors.

Also under the plan, the reorganized group may conduct a stock offering to purchase up to $150 million in shares of new common stock, 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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