Reorganization plan for airline would void stock

• Turnaround firm has links to airline
• Wyoming firm puts in bid for Hawaiian Airlines

By Deborah Adamson
Advertiser Staff Writer

A reorganization plan for Hawaiian Airlines has been put forth by Boeing Capital and Corporate Recovery Group . Bruce Asato • The Honolulu Advertiser

While Hawaiian Holdings shares would continue to trade, its principal asset is Hawaiian Airlines stock, which would be canceled under the proposal announced yesterday. "Those assets will cease to have value," said Ron Orr, principal of Wilson, Wyo.-based Corporate Recovery Group LLC.

The plan announced yesterday is just one of several expected to be put forward in bankruptcy court. The court and creditors will eventually decide which proposal to accept.

When a company emerges from Chapter 11 bankruptcy, existing shares typically get canceled on the effective day of the reorganization as new shares are issued. It's more complicated in Hawaiian Airlines' case because of the holding company structure created two years ago.

When Hawaiian Holdings was established, shareholders of Hawaiian Airlines exchanged their stock for those of the parent. Hawaiian Airlines shares were taken private while Hawaiian Holdings became the publicly traded entity.

Hawaiian Holdings is controlled by former Hawaiian Airlines CEO John Adams.

The parent company, which was incorporated in Delaware, has 28 million shares outstanding.

Hawaiian Holdings will likely come up with its own reorganization plan, said Jerrold Guben, a bankruptcy attorney with Reinwald O'Connor & Playdon in Honolulu.

Shares of Hawaiian Holdings fell by 7.5 percent to $4.53 yesterday. Last year, the stock rose by 46 percent. This year thus far, Hawaiian Holdings is up 51 percent.

Reach Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.

Turnaround firm has links to airline

Corporate Recovery Group LLC, the firm joining with Boeing Capital Corp. in a bid to take over and restructure Hawaiian Airlines, is a small, private turnaround firm run by a bankruptcy attorney, the former CEO of a major accounting firm and a co-founder of CBS MarketWatch.

Ron Orr, a principal, owner and lead figure in CRG, is a Los Angeles attorney who was a partner at Gibson, Dunn & Crutcher and head of the firm's insolvency practice. Orr was counsel to Hawaiian Airlines in its previous Chapter 11 restructuring from 1993 to 1994, when Bruce Nobles headed the airline.

"Bruce and I have maintained a friendship and have been in contact ever since," Orr said.

CRG has tapped Nobles to head the airline again if it succeeds in taking over Hawaiian.

Orr formed a legal and business consulting practice in 1997 and has acted as a business consultant to real-estate private equity firm Colony Capital Inc.

CRG is based in Wilson, Wyo., near where principal and owner Allan Tessler lives. Tessler, a lawyer and specialist in turnaround financing, is a co-founder of CBS MarketWatch and headed Financial News Network. Orr met Tessler while representing FNN in 1991.

Tessler is chairman of J Net Enterprises, an Internet incubator that he created after running a slot machine company called Jackpot Enterprises.

A third owner and principal, Eugene Freedman, is former chief executive and chairman of Coopers & Lybrand LLP, U.S. He is a former managing director of private equity firm Monitor Clipper Partners and has been senior adviser of Monitor Company Group LP, a business strategy and consulting firm.

According to CRG's brochure, the three principals "have successfully restructured major businesses in bankruptcy proceedings from start to finish. While we work with and for institutional investors and capital sources, we also have established relationships with capital sources that know and respect us, have substantial available capital and are interested, when required and appropriate, in investing in challenging situations."