Northwest files plan to get out of bankruptcy
By Dan Reed
By Dan Reed
Northwest Airlines yesterday filed its long-awaited plan for getting out of Chapter 11 bankruptcy, promising to pay its unsecured creditors newly issued stock valued at about three-quarters of what they're owed.
In a conference call with reporters, CEO Douglas Steenland said Northwest is on track to emerge from Chapter 11 before June 30.
Steenland said the Eagan, Minn.-based carrier still has "additional work to accomplish" while in Chapter 11, but that its restructuring work "positions Northwest well for future profits."
The filing in a New York bankruptcy court answered many, but not all, of the key questions of how a reorganized Northwest plans to operate outside of Chapter 11. Northwest and Atlanta-based Delta filed for Chapter 11 protection on the same day in September 2005.
Left unanswered for now: Northwest management's stake in a reorganized company.
Controversy erupted a year ago when United Airlines executives proposed sharing in new stock valued at 15 percent of the reorganized United. Management eventually settled for a smaller share before United emerged in February 2006.
Northwest expects to have a reserve of nearly $2 billion to operate with when it leaves bankruptcy, about $1.2 billion already borrowed from a consortium of institutional lenders, and $750 million in stock in the reorganized company.
Northwest Airlines officials say their carrier should be worth between $6.5 billion and $7.6 billion when it emerges.
According to the company's filing, the airline's unsecured creditors will get anywhere from 66 percent to 83 percent of the value of their claims.
Northwest officials said they expect pretax profit to soar to $1.4 billion in 2010. Since entering Chapter 11, Northwest has sifted out $2.4 billion in annual operating cost savings.