Plan for National includes stock sale

Friday, Jan. 25, 2002 | 11:02 a.m.

A Florida company led by a former British airline executive has filed a reorganization plan for bankrupt National Airlines.

U.S. Bankruptcy Court Judge Linda Riegle will decide next week whether the plan from Old Mission Assessment Corp. of Miami can be considered by creditors.

The judge must consider whether the plan, submitted Jan. 14, conforms with an exclusivity agreement. Under bankruptcy code, a debtor has the exclusive right to file its own reorganization plan for the first two months after the bankruptcy filing. After that, the debtor can ask the court for an extension.

National has filed for continuous extensions of the agreement and a spokesman for the company said it was unclear whether the Old Mission plan would be allowed.

Old Mission's plan is similar to National's reorganization plan except it proposes an injection of $60 million in cash with publicly traded stock. Old Mission, a holding company for a business that works as a bankruptcy consultant, has traded over the counter and this month was approved to trade on the Nasdaq exchange.

Since it was founded, National has been a closely held private company.

Ian Herman, an Old Mission executive, is the former chairman of British World Airlines, a company that held a Federal Express contract to transport freight in Europe in addition to transporting passengers.

Herman, in Las Vegas in advance of National's reorganization plan consideration Tuesday, said he could not discuss many details about his plan because of bankruptcy code rules.

However, he said he hoped his plan would be considered, since creditors in the National case have no other alternatives and he believes many creditors aren't happy with what they're being offered.

National officials have said their plan is favored by most the company's creditors and only one major creditor -- Pembroke Ltd. of Ireland -- is at odds with the airline's plan.

Pembroke is one of National's eight aircraft lessors and owns four of the airline's 15 Boeing 757 jets. National has said if it can't arrange new lease terms with Pembroke and if it demands its planes back, the airline would negotiate with another lessor for different planes in what has become a buyer's market in the past year.

Under National's proposed reorganization plan, the airline has renegotiated terms with many of its suppliers.

Once the reorganization plan is confirmed, National plans to apply for a $70 million federally secured loan, similar to the $429 million loan America West Holdings Corp. received earlier this month.

The government-backed loans are part of a $15 billion bailout program approved to help airlines hurt by the Sept. 11 terrorist attacks.

National officials said last month that two unnamed banks, one on the East Coast and one on the West Coast, would be co-participants in the loan.

Under terms of the America West loan, the Tempe, Ariz.-based airline agreed to issue warrants to give the government the option to purchase shares of the company's common stock to secure the loan.

National also is expected to issue similar warrants to the government as part of the terms of its loan.

National attorney Craig Hansen said the names of the lenders and two new equity partners would be disclosed when the loan deal is in place. He called the $70 million loan "expensive, difficult financing," but the airline would not disclose terms of the package nor the interest rate.

Once the loan is in place and the reorganization plan is in effect, National would begin paying off creditors.

Herman said National's management "has done a fine job of establishing the airline's business plan," with its hub-and-spoke operation of flights to and from Las Vegas.

But he was critical of the National management plan's reliance on government-secured financing and expensive debt.

Herman said he agreed with National's use of Las Vegas as a center of operations and thinks the company could become more profitable with expanded operations -- possibly with direct international flights to Asia, Canada and the Caribbean.

Herman and National Chief Executive Officer Mike Conway met shortly after Old Mission filed its plan, but National spokesman Dik Shimizu said little came out of the meeting.

"There's not a whole lot we can say because there's not a whole lot of information on this group," Shimizu said. "It's a holding company with very little substance in the form of capital at all, but if we receive a genuinely substantive offer, it is our responsibility to look at it."

Shimizu said it's common for companies to make late bids when the bankruptcy process is nearing conclusion and that National's management warned its employees that there could be efforts to do that.