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The Honolulu Advertiser
Posted on: Friday, May 16, 2003

Boeing Capital presses airline trustee request

By Kelly Yamanouchi
Advertiser Staff Writer

Boeing Capital Corp. yesterday rejected Hawaiian Airlines' request for a court-appointed examiner coupled with the resignation of the carrier's chief executive officer, asking instead for an immediate ruling on its motion for a trustee to replace the airline's management.

A Boeing Capital attorney said that Hawaiian, in seeking an examiner, "has inherently acknowledged that the evidence establishes cause for the appointment of a trustee."

Hawaiian filed for Chapter 11 bankruptcy protection on March 21, saying it needed to renegotiate its aircraft leases with Boeing Capital and other lessors to return to normal operations.

Boeing Capital has accused Hawaiian of mismanagement and making fraudulent transfers that bled the carrier of cash that could have been used to pay its lessors and creditors.

Boeing Capital's charges and comments made by bankruptcy court Judge Robert Faris expressing concerns about the company's financial transactions have increased pressure on Hawaiian CEO John Ad-ams to step aside.

But while Hawaiian has offered the resignation of Adams, it has tied the offer to its motion for appointment of an examiner. An examiner, who would investigate Hawaiian's business and report back to the bankruptcy court, would be a less dramatic change for the carrier than the appointment of a trustee, who would take over operations of the airline.

In a letter to Judge Robert Faris, Boeing attorney Susan Foster called Hawaiian's motion for an examiner "an apparent attempt to alter or delay this court's ruling on the merits of the trustee motion." Foster said its opposition to an examiner represents the views of both Boeing and Hawaiian's creditors committee.

Hawaiian said it was not admitting any liability or wrongdoing, but was proposing an examiner "to assuage the concerns of the parties in interest in this Chapter 11 case" and to reach a "satisfactory resolution" on Boeing Capital's request for a trustee.

Hawaiian has asked for a quick hearing on its request for an examiner, but Faris has not indicated whether he plans to hear its motion or respond to Boeing Capital's request for an immediate ruling on a trustee.

In an interview yesterday, Adams said his offer to resign "speak to the judge and speak to the public indicating that we were willing to be very flexible."

"I felt that I was a lightning rod for Boeing and the creditors committee, and I was concerned with the impact of that on the airline," Adams said. "I think it's time for the company to move on, and move on without me."

Adams would be replaced by the airlines' president and chief operating officer Mark Dunkerley, picked by Adams to help run the carrier.

But Anil Patel, a director in Boeing Capital's aircraft financial services group who is responsible for agreements with Hawaiian, said the airline would continue to benefit Adams if Dunkerley headed it.

"Mark Dunkerley was hand-picked by Adams," Patel said. "It's very clear that (Adams) still wants to stay in control of the airline, and we would still have the same problems with conflicts of interest and insider transactions that we had before."

Boeing has accused Hawaiian of refusing to acknowledge conflicts involving Adams and his business connections, and characterized Hawaiian's $25 million stock buyback last year and a $500,000 transfer to its holding company shortly before its Chapter 11 filing as fraudulent transfers. Hawaiian has denied the charges.

Foster also called Hawaiian's offer to repay the $500,000 received by its parent company "a carrot to induce this court not to grant the trustee motion."

Hawaiian spokesman Keoni Wagner, in response, said "the board has put a legitimate solution on the table." Adams went further, suggesting Boeing hopes to take over the carrier.

"I don't know what Boeing's motivation is in its dissatisfaction with our proposal other than that I think it wants to impose itself on the governance of the company," Adams said.