Wyoming firm puts in bid for Hawaiian Airlines
• Reorganization plan for airline would void stock
By Debbie Sokei and Deborah Adamson
Advertiser Staff Writers
Boeing Capital Corp. and former Hawaiian Airlines CEO Bruce Nobles have joined with a little-known turnaround company based in Wyoming in a bid to take over the bankrupt Hawaiian Airlines.
Corporate Recovery Group LLC of Wilson, Wyo., proposed bringing Hawaiian out of bankruptcy by investing $30 million cash and cutting the cost of jets the carrier leases from Boeing. In exchange, CRG would eventually own 90 percent of the airline, and Boeing Capital would get back some of the more than $40 million Hawaiian owes it. Hawaiian Airlines' current shareholders would get nothing.
The proposal is the first of what is expected to be several competing offers to bring Hawaiian out of bankruptcy. The courts and airline creditors will determine which bid wins.
Under the plan announced yesterday, Hawaiian would continue flying all its routes and employees would not be asked for concessions, except for renegotiating the pilots' pension plan.
"This validates that Hawaiian is a great airline that can be reorganized efficiently and set free to compete in our improving market," said Jim Giddings, chairman of Hawaiian Airlines' unit of the Air Line Pilots Association. "In the end, the author of the winning plan isn't as important to us as whether the plan itself protects the pay and benefits that we have earned."
The fact that Boeing Capital was the first out of the gate with a plan could be an attempt by Boeing, Hawaiian's largest creditor, to set a floor on what creditors get in the reorganization, said Jerrold Guben, an attorney with Reinwald, O'Connor & Playdon who specializes in bankruptcy cases.
Often creditor groups want to encourage competition for a bankrupt company, aware that the increased bidding could raise the amount they get back on their debts.
CRG said it would repay all unsecured claims of $500,000 or more, which includes Boeing's claim, with subordinated notes — which are similar to corporate bonds — as warrants redeemable for shares in the reorganized airline and proceeds from lawsuits.
Smaller unsecured creditors would get 50 percent of their claims.
"The ability to exchange notes for the larger unsecured claims really sets this plan apart," Nobles said. "Often, creditors receive only stock in their reorganized company. These notes would be repaid at market rates, providing creditors with an attractive recovery that is higher than is customary in airline bankruptcies."
Josh Gotbaum, the court appointed trustee of the airline, said the CRG plan is "a starting point for others that have expressed similar interest in Hawaiian."
Gotbaum has said he will be filing a reorganization plan of his own in June. Last month he told employees last month he needed $11 million in labor concessions to bring the airline out of bankruptcy, which was met with opposition from the airline's unions.
In addition to CRG and Gotbaum, reorganization plans will likely come from John Adams, the chairman of Hawaiian Airlines' parent Hawaiian Holdings Inc., and Vx Capital Partners, a San Francisco-based private finance firm that invest in commercial aircraft.
Thomas Fritsch, in-house counsel and spokesman for Hawaiian Holdings, objected to CRG's plan because it leaves the approximately 4,000 Hawaiian shareholders with nothing.
"We will continue to champion shareholder interests and will fight to maintain value for shareholders," Fritsch said in a statement.
Stephen Compagni Portis, a partner in Vx Capital, said his plan is in the advance stages. Compagni Portis was in Hawai'i yesterday meeting with stakeholders and employees. He said he has the capital to bring Hawaiian out of bankruptcy but would not disclose how much he is willing to invest in the airline.
CRG argued that by partnering with Boeing and Nobles, the former CEO of Hawaiian, its plan has advantages the others cannot deliver, including getting a better deal on future jet leases.
"This plan contains mutually agreeable revisions to the Boeing aircraft leases, which will result in substantial cost savings to the airline and the continued availability of a new Boeing fleet," Nobles said.
Nobles, Hawaiian's CEO from June 1993 to March 1997, helped guide Hawaiian out of its last bankruptcy reorganization in 1994.
"Nobles' previous HAL experience may give his plan some credibility," said Giddings, the pilot union representative.
While Adams will try to protect shareholders in his plan, the CRG plan is aimed at protecting the creditors.
Boeing Capital, which is the largest unsecured creditor, says it is owed $40 million and that claim could go up substantially. Hawaiian has 11 Boeing 717 and three Boeing 767-300 jets under long-term lease from Boeing Capital. The money owed is for non-delivery of three additional Boeing jets.
Among Hawaiian's other creditors is Panda Travel, a Honolulu-based travel agency, which is owed $5.6 million. Jim Donovan, spokesman for the travel agency, said the company is aware of CRG's plan and will review it next week.
Star Seigle Communications, Hawai'i's largest marketing company, is waiting to collect $570,000 from Hawaiian.
Hawaiian did clear a $550,000 debt with Hawaii Medical Services Association shortly after the company filed for bankruptcy in March.
An attorney for the unsecured creditors committee said yesterday they are reviewing the CRG plan.
CRG has arranged a Feb. 27 bankruptcy court hearing where the investors will ask the court to set a deadline for other Hawaiian bids and grant CRG a topping fee of $5.8 million, an amount they want to be paid if their bid fails.
Gotbaum objected to the topping fee, in a bankruptcy court filing late yesterday.
Reach Debbie Sokei at dsokei@honoluluadvertiser.com or at 525-8064. Reach Deborah Adamson at dadamson@honoluluadvertiser.com or at 525-8088.
