Total sale of National is envisioned, losses continue

Friday, June 8, 2001 | 10:55 a.m.

National Airlines continues to lose money at the rate of $2 million-plus per month while operating under Chapter 11 bankruptcy protection, court records reveal, and airline executives are looking to sell most of its assets.

In documents filed in U.S. Bankruptcy Court in Las Vegas, National also said it is seeking a second extension of the period in which it has the exclusive right to file its own plan for reorganization.

Under bankruptcy code, a debtor has the exclusive right to file its own plan for the first two months after the filing. After that, it can ask the court for an extension.

National, which filed for bankruptcy protection Dec. 6, received an extension that expired June 1 and now is seeking a second extension that would enable exclusivity through Aug. 31 as well as extend the date for securing acceptance of the plan from creditors to Oct. 31.

Judge Linda Riegle is scheduled to hear arguments on the motion June 26.

"The debtor has made, and continues to make, significant progress in its efforts to reorganize its business," the court filing says. "Specifically, the debtor has been, and continues to be, engaged in extensive good-faith discussions and negotiations for a sale of substantially all of its assets."

Although not named in the court document, billionaire financier Carl Icahn is believed to be the party with whom National is negotiating.

National spokesman Dik Shimizu said today that the airline has continued talks with Icahn.

A representative of Icahn Associates had said in court last week that Icahn had made his final offer and that it expired at the close of business June 1. Representatives of Icahn Associates could not be reached for comment today.

The court filing says the second extension of the period for National to file its own plan is warranted by the size, nature and complexity of the case, the airline's cooperative approach with creditors, the progress made in negotiating a successful conclusion to the case and the need for additional time to complete negotiations.

Robin Phelan, an attorney representing the unsecured creditors in the case, said today his clients are supporting the extension because they feel it would help the company's negotiations with Icahn.

"Sometimes having it (the exclusive right to file its own reorganization plan) is good for creditors and sometimes it's bad," Phelan said. "In this case, we think it's good. National has been negotiating with Mr. Icahn and we feel that process should be continued."

Phelan said some of the unknowns of dealing with Icahn are preferable to unknowns that could interrupt the reorganization process.

National already bought some time on another front when Riegle granted a temporary restraining order one week ago blocking Harrah's Entertainment Inc. from withdrawing cash from the airline. Harrah's, which holds a 48 percent share in the airline, sought payment from ticket receipts of some $17.4 million in loans it has made to the airline.

National contends that without that ticket revenue, it would have had to shut down, throwing 1,400 employees out of work and stranding thousands of passengers.

Harrah's and National are expected to be back in court Monday to argue an extension of the restraining order or an injunction on the same issue.

Meanwhile, monthly operating reports filed with the court show that National has lost more than $22.1 million from the date of the bankruptcy filing to April 30.

In April, the airline lost $2.1 million compared with $2.2 million in March. April revenue of $28.5 million was up from $27.8 million in March. The company ended the month of April with a cash balance of $1.3 million.

National Chairman Mike Conway testified at the hearing on the restraining order that the airline has had record advanced bookings in two consecutive weeks in May and that it had its largest sales day ever May 30, almost two years to the date after the airline began flying.