Hawaiian Air trustee joins in payment plan

By Dan Nakaso
Advertiser Staff Writer

Hawaiian Airlines bankruptcy trustee Josh Gotbaum said yesterday that he will join with San Diego-based Ranch Capital LLC on a plan to pump capital into the airline and pay off 100 percent of the airline's debts.

Ranch Capital is one of a handful of groups that have expressed interest in reorganizing the airline. Those groups have until Monday to file plans with the bankruptcy court, which will select a plan in the coming months.

Winning the approval of Gotbaum, who was appointed by the bankruptcy court to run the airline while it is under court protection, should give a boost to Ranch Capital's standing.

The joining of Gotbaum and Ranch Capital will also likely be welcomed by Hawaiian Airlines shareholders. Ranch Capital has said it will honor current shares even though equity stakes often are canceled by bankrupt companies.

Lawrence S. Hershfield of Ranch Capital took a major stake in Hawaiian Airlines' parent, Hawaiian Holdings, in June when he bought 10 million of the company's 28.4 million shares for $41.4 million and replaced former Hawaiian CEO John Adams on the board of directors.

Under the Gotbaum-Hershfield plan, Hershfield would become chairman of Hawaiian Airlines; former American Airlines CEO Donald Carty would be a member of the board. Mark Dunkerley, Hawaiian's president and chief operating officer, would become chief executive officer, replacing Gotbaum.

Gotbaum said the plan would offer Hawaiian's creditors full payment of their approved claims — either in the form of 50 percent cash and 50 percent stock or by accepting a long-term note. The method of payment would be up to the creditors.

Gotbaum said the plan also calls for Ranch Capital to invest more than $160 million to purchase claims and reorganize Hawaiian.

Hawaiian's union employees would be asked to negotiate a new contract, Gotbaum said.

"Hawaiian cannot exit bankruptcy until satisfactory new contracts have been negotiated," Gotbaum said in an e-mail responding to a request for details. "Hawaiian Holdings has not yet said what they're looking for (from the unions)."

Gotbaum said in a news release: "This plan provides value both to shareholders and creditors of Hawaiian Airlines in a consensus proposal that will make it easier and faster to exit bankruptcy. It offers creditors payment in full for their claims while providing capital for Hawaiian's future growth. The approval of this proposed plan will confirm Hawaiian Airlines' successful turnaround. Hawaiian's bankruptcy may be the first ever in the airline industry that ends with creditors receiving payment in full for their claims."

Hershfield said in a statement that "we believe Hawaiian's emergence will also benefit the state of Hawai'i and the Hawaiian economy."

One of the competing reorganization bids was submitted by Corporate Recovery Group LLC, a Wyoming-based turnaround company, and Boeing Capital Corp.

Boeing Capital leases airplanes to Hawaiian and is the airline's largest creditor. Its plan with CRG would include Bruce Nobles, Hawaiian's former CEO.

Nobles did not respond yesterday to a request for comment on the Gotbaum-Hawaiian Holdings proposal.

Boeing spokeswoman Donna Mikov said the company had no comment on the plan, other than to say: "We're encouraged by the value that other companies see in Hawaiian Airlines. ... We think they're a valued customer."

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or at 525-8085.