National Airlines talking to second potential buyer

Wednesday, June 13, 2001 | 10:56 a.m.

A U.S. Bankruptcy Court judge said she isn't optimistic about National Airlines' chances of striking a deal with a buyer that could pull the Las Vegas-based airline out of bankruptcy.

Meanwhile the chief executive officer of National disclosed today that the airline is negotiating with a second party as well as billionaire financier Carl Icahn.

Judge Linda Riegle made her remarks in a procedural hearing Tuesday in which National attorneys were attempting to consolidate a preliminary injunction hearing with a trial on extending a restraining order that blocks 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 for some $17.4 million in loans it has made to National.

Addressing National attorney Daniel Garrison at Tuesday's hearing, Riegle discussed National's options if Harrah's were to begin collecting ticket receipts at the end of the month.

When arguing for the restraining order last month, National officials said the airline would be forced to close if Harrah's siphoned off ticket receipts. They sought to block Harrah's, saying they needed more time to negotiate a deal that could resolve the bankruptcy.

Riegle told Garrison, "... there is a possibility you'll close because you still don't have a buyer and you're nowhere."

National Chief Executive Officer Mike Conway, who wasn't at Tuesday's hearing, said he felt Riegle was speaking rhetorically about the airline's chances of success without a buyer.

Conway said today that the airline is talking to Icahn and a second bidder for the company, but he would not disclose the potential buyer's identity or any other specifics.

"She (Riegle) hasn't seen what we intend to file," Conway said. "I'm not at liberty to give the details to it, but that's what we're working on 18 hours a day here, both transactions."

A spokesman for Harrah's had no comment on the judge's remarks.

National officials have said since late May that they have been in negotiations with Icahn. A representative for Icahn Associates told the court in May that the company's final offer was expiring May 31. Since then, National said talks with Icahn have continued.

Court documents have indicated that National was negotiating a sale of the company, but did not name Icahn or anyone else specifically as potential buyers.

Icahn Associates has been silent about the negotiations or its possible role in the company. Company officials could not be reached for comment today.

Icahn began talks with Conway in March after his failed bid to acquire TWA. Icahn wanted to acquire an airline to provide inexpensive seats to support an Internet ticket sales company, Las Vegas-based Lowestfare.com.

Icahn also owns three Las Vegas properties, the Stratosphere hotel-casino on the Strip and two Arizona Charlie's operations.

Creditors generally have been supportive of the court granting National extensions in the bankruptcy process because they want to see the airline continue to fly and emerge with enough financial strength to pay its debts. National has about 64 flights a day, all of them either departing from or arriving at McCarran International Airport. About 1,400 employees work for the company nationwide.

Harrah's was enabled by court order to begin collecting ticket money to pay off National loans. But Riegle's issuance of a temporary restraining order blocked Harrah's from changing the existing cash flow. The matter will be the subject of a court hearing and trial June 22 and June 25-26.

Court observers have speculated that Icahn may be toughening his negotiating stance, knowing that National and Conway are running out of options. National has asked for 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 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.

Riegle is scheduled to hear arguments on that motion June 26.

Monthly operating reports filed with the court show that National has lost more than $22.1 million from the date of the bankruptcy filing Dec. 6 to April 30.

The airline lost $2.1 million in April and $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.

Conway told the court in May 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.