Ex-Hawaiian CEO files reorganization proposal

By Debbie Sokei
Advertiser Staff Writer

The reorganization plan of John Adams, former Hawaiian CEO, is the third one filed. Advertiser library photo

Adams' plan is similar to what Corporate Recovery Group LLC, a Wyoming-based turnaround company, proposed last month except current shareholders will get 40 percent ownership in the new company. CRG's plan would make the stocks worthless.

Adams said the $30 million investment will come from Hawaiian Holdings Inc., the parent company of Hawaiian Airlines, and Airline Investors Partnership in return for 50 percent of the company. Adams is chairman of Hawaiian Holdings and controls AIP.

Adams' preliminary reorganization proposal is the third one filed and at least two more parties are expected to file plans. Robert Konop, a Hawaiian Airlines pilot, filed his reorganization plan last week.

"This isn't the first proposal and it won't be the last," said Josh Gotbaum, Hawaiian's court-appointed trustee.

The bankruptcy court and a creditors' committee must approve any reorganization plan. No date has been set for that decision.

As part of his plan, Adams is not asking for employee concessions and will negotiate a three-year extension on union contracts. He also wants to add more routes to Asia and to the Midwest and East Coast, and keep the current management team.

Corporate Recovery Group said it would also invest $30 million into the airline in exchange for 90 percent of the company, and is not asking for employee givebacks.

"Our plan treats labor fairly," Adams said. "It creates a future for Hawaiian Airlines that benefits the economy of Hawai'i and it recognizes the inherent value of Hawaiian Airlines that will be shared fairly with the creditors and the shareholders."

Also under Adams' plan, all unsecured creditors' claims of more than $500,000 will be repaid with $160 million worth of unsecured notes plus 10 percent of new stock. Adams hopes to operate Boeing aircraft under the same lease agreement negotiated between CRG and Boeing Capital Corp. The terms of that deal have not been made public.

Hawaiian Airlines filed for bankruptcy in March 2003 after Adams could not reach an agreement with Boeing to reduce the leases on Hawaiian's fleet. Adams was removed on Boeing's request and a trustee was appointed by the court to take the airline out of bankruptcy.

Adams said he would come up with a plan to pay for the pilots' pension as soon as he gets more information from Hawaiian.

Jim Giddings, chairman of Hawaiian's unit of the Air Line Pilots Association, said he has not seen Adams' proposal but he is not surprised another plan was filed.

"The more interest in Hawaiian the better," Giddings said. "From here going forward we would like to see a plan that treats us fairly and addresses our concern that we have."

However, at least one airline employee wasn't sure Adams should be the one to take the airline out of bankruptcy.

"He was the one who took us into bankruptcy," said an employee who asked not to be identified because she hasn't seen Adams' plan yet. "Everything I heard about him is not so good. I don't trust him. Things have gotten really better since he left."

The Securities and Exchange Commission is investigating a controversial stock buyback program engineered by Adams less than a year before he took the airline into bankruptcy. The airline bought back 5.88 million shares from stockholders at $4.25 per share, or 31 percent more than what the shares had been trading when the buyback was announced. Adams pocketed $17.1 million from the buyback. John Nester, spokesman for the SEC in Washington, said he could not comment on pending cases.

Adams said if the court and creditors select his plan, he hopes to have Hawaiian out of bankruptcy by fall 2004. He said his plan is preliminary because he has not received all the financial and traffic information he requested.

Gotbaum, Hawaiian's trustee, said parties interested in filing a reorganization plan will get the information necessary to file a complete plan.

"To find the best proposal, it's important that every qualified investor knows there will be fair competition," Gotbaum said. "This means that each qualified party gets enough detailed information about the company to formulate a complete proposal, and that all proposals are evaluated at the same time on the same basis."

Reach Debbie Sokei at 525-8064 or dsokei@honoluluadvertiser.com.