ATA renegotiates bond payments
By Melissa Allison
Chicago Tribune
CHICAGO — ATA finalized a deal with bondholders yesterday, allowing the low-cost airline to avert a financial crisis that was leading it toward bankruptcy.
Advertiser library photo • July 31, 2000
Indianapolis-based ATA, which is the largest carrier at Chicago's Midway International Airport based on passengers, has been working since August to renegotiate the terms of its bond payments.
Low-cost airline ATA has an 8 percent share of the Mainland-to-Hawai'i market and will add a daily Honolulu-to-Seattle flight on Feb. 20.
Yesterday, the carrier pushed the maturity dates on $300 million in bond payments from 2004 and 2005 to 2009 and 2010.
"It eliminates the prospect of us filing for bankruptcy," said David Wing, the airline's chief financial officer.
ATA was the only major low-cost airline saying it might have to file for Chapter 11 protection. Airlines nationwide have suffered since the terrorist attacks of Sept. 11, 2001, but low-fare carriers have gained market share and performed better financially than mainline competitors such as United Airlines.
ATA has an 8 percent share of the Mainland-to-Hawai'i market and will add a daily Honolulu-to-Seattle flight on Feb. 20.
ATA struck a deal with Boeing Co. and two other aircraft lessors last summer to reduce the carrier's payments by nearly $150 million in the short term. About $30 million of that amount is retroactive to 2003 and was refunded to ATA yesterday.
The lessor agreement was contingent upon a change in ATA's terms with bondholders, something the airline has worked to achieve since August.
Yesterday, the owners of 87 percent of the $300 million in bonds accepted ATA's offer of an increase in their interest payments in exchange for a later maturity date.
ATA now has five more years before the bonds mature, but the company will pay 2.5 percentage points more in interest on the bonds for the next 30 months, and 3.5 percentage points more after that.
Without the bond exchange, ATA would have had to make $171 million in lease payments on aircraft during the first quarter, an amount it could barely afford.
"Even though we could have and would have made those payments, it would have left the company with very low cash balances, and we would have been very uncomfortable being there," Wing said.
