National bankruptcy plan progressing

Friday, Sept. 13, 2002 | 11:13 a.m.

Las Vegas-based National Airlines moved another step closer to emerging from Chapter 11 bankruptcy protection Thursday when a judge gave tentative approval to a $112 million financing package.

Judge Linda Riegle said she would sign an order as soon as attorneys from the major creditors in the case reviewed the language of the plan.

Once formally approved, National, which has been operating under Chapter 11 protection since December 2000, would have access to $11.6 million of $25 million that is considered debtor-in-possession financing from Foothill Capital Corp., a subsidiary of Wells Fargo Bank.

The rest of Foothill's loan would be considered "exit financing," cash available after the company is out of bankruptcy. Because the debtor-in-possession loan would be rolled into the exit financing, it required legal revisions that led to a delay of immediate approval of the plan Thursday.

National expects to draw from the $11.6 million next week and will begin paying some creditors.

National's attorneys and Riegle were dismayed late in Thursday's hearing when a creditor participating in the hearing by telephone voiced an objection to the plan. An attorney for San Francisco International Airport, owed $415,000 by National, objected to Foothill Capital getting priority to be paid ahead of other creditors should National be unsuccessful.

National attorney Craig Hansen, also participating by telephone, said if the airport attempted to block the plan and National was forced to stop flying, no one would have a chance of getting paid what they're owed.

It was the first indication that the San Francicso airport was unhappy with any aspect of the plan. Other airports -- Philadelphia, Dallas-Fort Worth, New York and McCarran International -- have been participants in the process for months. San Francisco officials could not be reached for comment on whether they would press their objection. Riegle admonished the airport's attorney for waiting so long to participate.

National's modified reorganization plan, altered slightly from a plan Riegle approved in April that had been tied to an unsuccessful bid for a government-backed loan guarantee from the Air Transportation Stabilization Board, will be considered in an Oct. 8 hearing. The airline is targeting Oct. 30 as the date to emerge from bankruptcy.

National is hoping to have everything finalized before mid-November when the company plans to inaugurate seasonal service between Las Vegas and West Palm Beach, Fla. It plans to begin offering four flights a day between Las Vegas and Reno beginning next month.