Key creditor objects to National plan

Monday, Dec. 31, 2001 | 11:28 a.m.

Unsecured creditors for Las Vegas-based National Airlines have overwhelmingly voted to approve the bankrupt air carrier's reorganization plan, but six creditors are objecting, attorneys said Friday.

One of the objectors -- Pembroke Ltd. of Ireland -- is important to National's success because it leases four of the airline's 15 Boeing 757 jets.

National attorney Laurence Frazen told U.S. Bankruptcy Court Judge Linda Riegle Friday that Pembroke was one of six creditors that filed objections to the reorganization plan. Frazen and attorney Craig Hansen told Riegle that negotiations are continuing with those six, but that most of the 1,000 other creditors voted for approval.

At issue with Pembroke is the price of a revised lease agreement. National has renegotiated leases with most of its other major creditors, a key part of the reorganization plan.

Other companies that have filed objections are Rolls Royce, which leases engines on the jets; Dallas-Fort Worth International Airport, one of National's destinations; the city of Philadelphia, which operates the airport in that city, another destination; GE Capital, one of the airline's financiers; and Certified Airline Passenger Services, which has handled remote check-ins for the airline at some Las Vegas hotels.

Hansen and Frazen said progress has been made with key creditors, some of which have signed on to new contracts. They include seven other aircraft lessors, the company's maintenance contractor, the fuel supplier and financial backer Harrah's Entertainment Inc., which is supplying a letter of credit to the airline enabling it to be paid immediately for credit-card ticket sales.

With negotiations continuing with the six creditors on modified contracts, Riegle held off on confirming the plan until next month. Hearings are scheduled Jan. 15 and Jan. 29 and confirmation could occur at either of them.

Once the plan is confirmed, National will file an application with the Air Transportation Stabilization Board for a federally backed loan, another key component to the company's emergence from bankruptcy.

National would seek a $45 million loan from two unnamed banks, one based on the East Coast and another on the West Coast. Last month, attorneys said they were negotiating with one primary lender and using the other as a backup, but Friday, they said the banks are co-participants in the loan.

One of National's biggest rivals, America West Airlines, Tempe, Ariz., received conditional approval Friday for federal loan guarantees. Hansen said in the hearing that National officials were watching America West's loan application process closely since they would be undertaking a similar process.