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The Honolulu Advertiser
Posted on: Tuesday, August 31, 2004

Ranch Capital has 'leg up' in bid for Hawaiian Air

By Dan Nakaso
Advertiser Staff Writer

A proposal by Ranch Capital LLC to take control of Hawai'i's largest airline was gaining momentum yesterday as the bankruptcy proceedings moved into a new phase.

The deadline passed yesterday for groups to submit reorganization plans for Hawaiian Airlines to the U.S. bankruptcy court.

San Diego-based Ranch Capital's plan got a boost late last week when the company lined up the support of both the bankruptcy trustee and the official creditors' committee. In June, Ranch Capital bought $41 million worth of Hawaiian Airlines' parent company's stock.

"I wouldn't say it's a slam dunk, but it certainly gives them a big leg up," said Raymond Neidl, a stock analyst with Blaylock & Partners in New York.

Hawaiian Airlines filed for Chapter 11 bankruptcy in March 2003 after the company could not reach an agreement with Boeing to reduce the cost of leased jets. The bankruptcy court invited interested groups to submit reorganization plans. The court will select a winner to take control of the airline in the next few months.

Hawaiian employees and other bidders were keeping an eye out for the Ranch Capital plan. Ranch Capital had not filed as of yesterday evening, but had until midnight to submit the plan.

Ron Orr, a principal, owner and lead figure in Wyoming-based Corporate Recovery Group LLC — which earlier submitted its own reorganization plan — declined to comment on Ranch Capital's prospects.

"We're waiting to see (the Ranch Capital plan)," Orr said.

He pointed out that all of the groups that submit reorganization plans have until Sept. 9 to make amendments.

CRG's plan would include Bruce Nobles, Hawaiian's former CEO. CRG also had previously aligned itself with Boeing Capital Corp., which leases planes to Hawaiian and is Hawaiian's largest creditor.

Yesterday, Boeing spokeswoman Donna Mikov said, "We want to stay neutral and review all of our options. Obviously, we think it's great that other folks see the value of Hawaiian, and we look forward to it coming out of bankruptcy."

Two other groups had filed competing reorganization plans by yesterday's deadline. One was led by Hawaiian Airlines pilot Robert C. Konop, the other by Madison 50 Air Partners LLC, a company formed by Jefferies & Co., a subsidiary of the New York-based global investment bank Jefferies Group, Inc.

Ranch Capital has said it would invest more than $160 million to purchase claims and reorganize Hawaiian.

Creditors would receive full payment of their approved claims in the form of 50 percent cash and 50 percent stock, or by accepting a long-term note.

Hawaiian's bankruptcy trustee Josh Gotbaum, said it would be the first time that creditors receive full payment from a bankrupt airline.

Ranch Capital CEO Lawrence 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.

Hawaiian's union employees would be asked to negotiate new contracts.

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