Hawaiian Airlines' shareholders at risk
By Dan Nakaso
Advertiser Staff Writer
Once Hawaiian Airlines emerges from bankruptcy protection, it's possible that Hawaiian's creditors will end up owning the airline and that the current common stock will be worthless.
Hawaiian Holdings shares closed the week at $1.23, up a penny. They reached their 52-week high of $2.50 on Dec. 30. The 52-week low of 29 cents occurred on June 13.
Creditors in a bankruptcy must be satisfied first and rarely are repaid every penny they're owed, said Josh Gotbaum, Hawaiian's bankruptcy trustee.
Stock prices
Instead, they would likely be offered stock in Hawaiian Airlines — not in Hawaiian's parent company, Hawaiian Holdings Inc., which controls the common stock, Gotbaum said.
It's possible that "we will give all of the stock to those creditors and nothing to the common stock holders," Gotbaum told The Advertiser's editorial board last week.
"They would be wiped out in that case. The rules of bankruptcy are you have to satisfy the higher priority claims before you satisfy the lower priority claims. The common stock is at the bottom of the priority list."
Hawaiian Holdings shares closed the week at $1.23, up a penny, on the American Stock Exchange. They reached their 52-week high of $2.50 on Dec. 30. The 52-week low of 29 cents occurred on June 13.
Gotbaum's comments are critical to current stock holders, particularly to Hawaiian Airlines employees who have received stock over the years in exchange for labor givebacks during some of Hawaiian's previous troubled eras.
Like other shareholders, Hawaiian employees watched this year as trading in their stock was frozen twice — once when Hawaiian Airlines filed for Chapter 11 bankruptcy protection in March; and later in July following the resignation of the company's transfer agent.
Hawaiian Holdings is owned mostly by institutional investors and company insiders, who have a roughly 80 percent stake in the company. They are not creditors in the bankruptcy.
The majority owner — with 50.9 percent of the stock — remains Airline Investors Partnership, a company controlled by John Adams. He was removed from control of Hawaiian Airlines during a bitter court battle over the appointment of a trustee.
When asked whether Hawaiian Airlines is likely to merge with another airline, Gotbaum said: "Honestly, I don't have an opinion on that."
Asked whether the Islands will still have two locally owned airlines by 2005, he responded: "The honest answer is I don't know. The truth is I'm not knowledgeable enough about the economics of the market."
But the history of bankruptcies does show that Hawaiian Airlines faces important negotiations when it eventually emerges from bankruptcy, Gotbaum said.
The company already is confronting a $110 million claim from just one of its creditors, Ansett Worldwide Aviation Services Inc., because of renegotiated aircraft leases at lower rates.
Ansett leases seven Boeing 767s to Hawaiian and is just one of three aircraft lessors.
The most important, Boeing Capital Corp., leases two-thirds of Hawaiian's fleet and "hasn't yet negotiated a settlement. So you can figure out how big that will be," Gotbaum said.
If the airline should somehow end up with $70 million in cash reserves, Gotbaum said, creditors likely will go after the reserves.
"Creditors don't want shares of stock," he said. "They want cash."
But deciding the ratio of stock versus cash means potentially contentious negotiations.
"Sometimes that's an easy discussion," Gotbaum said. "And sometimes that's a hard discussion."
Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or 525-8085.
