Friday, Feb. 15, 2002 | 11:06 a.m.
Bankrupt National Airlines, which received another delay Thursday in its reorganization plan approval in court, will apply for a $70 million government-backed loan next week.
Attorneys for the Las Vegas-based airline -- which lost $4.6 million in December but remains a key carrier of tourists to the gambling capital -- say the company would submit its application to the Air Transportation Stabilization Board in Washington Tuesday.
It would be the fourth airline to attempt to take advantage of $10 billion available to airlines to back loans to recover from the aftershocks of the Sept. 11 terrorist attacks.
National rival America West Airlines was the first to apply for and get a loan guarantee from the board, $380 million approved in December.
National must convince the board that it is recovering from effects of the attacks and was financially viable before the terrorism occurred. One of the prerequisites of consideration for the government loan backing is to have a Bankruptcy Court-approved reorganization plan in place.
National's attorneys have been coordinating approval of the plan while preparing for the loan application.
The board must determine whether the company is a credit risk worthy of backing a loan that National is getting from Foothill Capital Corp., a subsidiary of Wells Fargo Bank. National attorney Craig Hansen said Thursday the airline hopes to be approved for the full $70 million loan but that the reorganization plan could succeed if as little as $45 million in loans are backed by the government.
National will go into the process two weeks after submitting a statement of operations to the Bankruptcy Court that says the airline lost $4.6 million in December. A spokesman for the airline said that's misleading, since part of the reorganization plan addresses financial concessions the company has won from several vendors, including eight aircraft lessors.
The statement of operations says the revised lease rates would have lowered National's net loss to $2.6 million for the month. Spokesman Dik Shimizu said without other special items like bankruptcy attorney fee and accounting for other concessions, the airline actually made $1.4 million in December.
National reported revenue of $17.4 million and expenses of $24.5 million and fees related to the reorganization of $493,000 for the month. The company also reported receiving $3.2 million that month as part of the government's aviation bailout compensation following the terrorist attacks.
Shimizu said National had a load factor of 67 percent in December, compared with 63 percent in December 2000, and while advanced bookings for March and April are flat compared with last year, they're higher than loads carried in the last three months.
He said the airline would submit a record of an improving financial picture to the board, including a return of tourists to the Las Vegas market that is above the national average. National, he said, had record bookings for a Monday one day last month, with about 17,000 seats sold.
Attorneys originally hoped to have the reorganization plan approved by Bankruptcy Court Judge Linda Riegle in late December. The bulk of the plan involves the conversion of National's debts to various creditors into equity in the company. That means instead of getting paid, many of the large companies that are owed money are getting stock in National. Those include the eight lessors of National's 15 Boeing 757 jets; B.F. Goodrich, the company that has the heavy maintenance contract on the airline's fleet; and GE Capital Corp., one of the airline's financiers.
Approval of the plan was delayed twice in January, with attorneys hammering out the final details with hundreds of creditors and determining how much equity each would have after the dilution of shares is calculated.
Concerned that creditors have begun jockeying for better deals pending final approval of the plan, Riegle set a deadline: Feb. 26.
"You're dealing with people who say, 'If they've got it, I want it too,' " Riegle said of the posturing, warning that companies that don't have a settlement in place by the deadline need to be prepared to argue their cases in court.
Riegle also approved National's retention of J.P. Morgan Securities as a financial adviser for the loan guarantee process despite what some attorneys considered to be a steep fee -- $1.5 million. The hiring of J.P. Morgan drew an objection from the Office of the U.S. Trustee, which monitors bankruptcy proceedings on behalf of the Department of Justice.
J.P. Morgan's hiring was backed by most creditors, who see the adviser as a key to convincing the Air Transportation Stabilization Board to back the loan.
Barry Jenkins, an attorney for the Office of the U.S. Trustee, said he preferred compensation to be directly related to the work involved. For example, National's financial adviser for developing the reorganization plan is on a monthly retainer.
New York-based Dresdner Kleinfort Wasserstein Inc., the restructuring adviser that was known as Wasserstein Perella & Co. when it was hired by National a year ago, is paid $150,000 a month and also will get a $2 million restructuring transaction fee, with payment not to exceed $4 million.
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