Role of aircraft lessors unclear in National case

Friday, June 22, 2001 | 11:11 a.m.

A $181.5 million offer to acquire Las Vegas-based National Airlines has been withdrawn by billionaire financier Carl Icahn, Bloomberg News reported Thursday.

Quoting Edward Weisfelner, a New York bankruptcy attorney representing Icahn, Bloomberg reported that Icahn pulled the offer after National's board of directors refused to present it to the bankruptcy judge overseeing the airline's Chapter 11 reorganization.

Weisfelner could not be reached for comment today. A National spokesman had no comment on the report, citing the confidentiality of negotiations between the airline and two separate parties.

Icahn, Bloomberg reported, offered $22.5 million in cash, $43 million owed passengers for unused tickets and $100 million in operating funds.

"The rejection suggests that they are working on a better deal with" aircraft leasing companies, Weisfelner told Bloomberg. "We were urged to withdraw earlier to make way for another proposal," the report said.

National spokesman Dik Shimizu said National is continuing to negotiate with Icahn as well as a second party.

National Chairman and Chief Executive Officer Mike Conway identified the second party as a syndicate of aircraft lessors in a taped interview on the Las Vegas Sun television program "Face to Face with Jon Ralston" Thursday, but he would not specify what companies are a part of that syndicate.

Attorneys for some of the lessors said they were unaware of any negotiations being undertaken with National while others had no comment.

"It's obvious to us that there's a lot going on to bring this (bankruptcy) to a conclusion," said Ronald Leibow, an attorney with Ansett Worldwide Aviation, Australia, one of the companies leasing National's 16 Boeing 757 twin-engine jets. "We will consider any proposal on its merits."

Susan Freeman, a Phoenix attorney representing three lessors -- C.I.T. Leasing Corp., New York, Boullioun Aircraft Holding Co. Inc., Bellevue, Wash., and Sunrock Aircraft Corp. Ltd., Ireland -- said her clients have no comment.

Representatives of the other lessors -- Tombo Aviation Inc., Japan; International Lease Finance Corp., Los Angeles; Pembroke Ltd., United Kingdom; and Pegasus Aviation Inc., San Francisco -- could not be reached for comment.

Negotiations with a second buyer would be "a very good development," said Dennis O'Dea, who represents B.F. Goodrich Aerospace, one of the largest creditors. Goodrich has a maintenance and repair contract on wheels and brakes and has about $2 million in unpaid repair orders.

"We have a significant stake in National Airlines' success and we're hopeful that a deal is completed soon," O'Dea said. He added that he is has not been apprised of the status of negotiations.

Negotiations between National and its buyers have been cloaked in secrecy since they began months ago. Conway said he is bound by a confidentiality agreement not to disclose details and representatives of Icahn Associates have not commented.

It's also unclear what role a syndicate of lessors would do with the airline if it became the successful bidder.

Some questions may be answered in a hearing before Judge Linda Riegle Tuesday.

The judge will consider the extension of a temporary restraining order and an injunction that blocks Harrah's Entertainment Inc. of Las Vegas from diverting ticket revenue to begin recovering funds it advanced National when it started operations more than two years ago.

Tuesday also is the scheduled bankruptcy status hearing on progress the parties have made to resolve the case, which began Dec. 6 with National's Chapter 11 filing.

In the Bloomberg report, Weisfelner said Icahn would not be represented at the Tuesday hearing.

During the bankruptcy, National has operated as a debtor-in-possession and has continued to fly its normal schedule. Airline executives have said ticket sales hit record highs in May and the airline has had minimal flight cancellations.