Message #6 From:
NewsBot Date: January 12, 2007 07:47:00 AM
NWACQ News Northwest Airlines Files Its Plan of Reorganization
EAGAN, Minn.--(BUSINESS WIRE)--Northwest Airlines Corporation (Pink Sheets:NWACQ) announced today that
it and certain of its subsidiaries have filed their joint Chapter 11
plan of reorganization with the United States Bankruptcy Court for the
Southern District of New York, which is overseeing its reorganization.
The plan provides for the treatment of claims of creditors, the
implementation of agreements with key labor groups, lenders and
suppliers, as well as the raising of new equity capital for Northwest.
Commenting on the plan, Doug Steenland, Northwest Airlines president and
chief executive officer, said, “The filing of
our plan of reorganization is a key milestone in our ongoing
restructuring efforts and begins Northwest’s
emergence from Chapter 11 protection.”
“Over the past 16 months, we have achieved the
three key objectives we set for our restructuring: we have removed $2.4
billion in annual costs from the business, we have restructured our
fleet and entered into new aircraft purchase agreements, and we have
significantly strengthened our balance sheet. We remain on track to
report a pre-tax profit for the full year 2006.”
Steenland continued, “By returning to
profitability, we will enable our employees, whose sacrifices have been
essential to the successful reorganization of Northwest, to share in its
success. For our employees, a healthy Northwest will ensure a future of
job security, pension and retirement benefits, profit-sharing payments
and access to a valuable claim.”
RESTRUCTURING PROGRESS
Discussing the airline’s restructuring
milestones to date, Steenland said, “We have
moved through the bankruptcy process quickly because of our success in
addressing key cost and revenue issues including labor costs and
pensions, new agreements with key suppliers, restructuring the Northwest
fleet, and substantially reducing debt.”
“Key to our successful restructuring efforts
to date are the permanent labor savings agreements we have reached with
the International Association of Machinists and Aerospace Workers (IAM),
the Air Line Pilots Association (ALPA), the Aircraft Mechanics Fraternal
Association (AMFA), the Aircraft Technical Support Association (ATSA),
the Transport Workers Union of America (TWU), and the Northwest Airlines
Meteorologists Association (NAMA), which have helped us realize the $1.4
billion in annual labor savings we required.”
Steenland continued, “Recognizing the
importance of pensions to our employees, we worked together over the
past several years with our union leadership and the Congress on a
carefully crafted solution, the Pension Protection Act, which has
preserved pension benefits for the 73,000 Northwest pension plan
participants. We have always believed saving our pension plans was the
right thing to do for our valued employees, and despite the many
obstacles we faced along the way, we did not waver from this commitment.”
“To ensure that Northwest has an efficient
and comfortable fleet, we reaffirmed purchase agreements with Airbus,
Boeing, GE Aircraft Engines and Pratt & Whitney that allow us to
continue to modernize our long-range fleet with A330 and 787 aircraft.
We also negotiated additional purchase agreements with Bombardier and
Embraer for new, dual-class regional jetliners that will improve our
domestic product.”
Discussing the airline’s regional aircraft
strategy, Steenland said, “We have nearly
completed agreements with our three Airlink partners –
Pinnacle, Mesaba and Compass – which will be
operating the regional aircraft that will provide convenient connections
to Northwest’s global network through its
three domestic hubs.”
“In addition, our operational costs were
improved by reshaping our maintenance organization, which resulted in
greatly improved economics while continuing Northwest’s
historic operational reliability.”
Speaking to the restructured balance sheet, Steenland said, “We
have completed a $975 million refinancing of existing bank obligations
at more favorable terms while gaining access to $250 million in
incremental liquidity. Our new facility can be converted to permanent
exit financing, securing the debt financing Northwest needs to emerge
from Chapter 11 protection.”
“The completion of this refinancing clearly
demonstrated that our key stakeholders in the capital markets recognized
Northwest’s progress towards its
restructuring goal of positive cash flow and sustained profitability.”
Steenland added that, “Reversing $4.2 billion
in losses since early 2001 was not an easy task, but one that was
essential to the future of the airline. Through our many restructuring
actions, we expect to report a significant year-over-year improvement in
pre-tax earnings from 2005 to 2006.”
PLAN HIGHLIGHTS
Creditors
The plan proposes to restructure Northwest’s
balance sheet through the elimination of all pre-petition unsecured
debt. In exchange for their claims, unsecured creditors will receive
common stock of the reorganized Northwest Airlines Corporation, and the
right to purchase additional common stock in a rights offering. Terms of
a rights offering will be provided at a later time. Unsecured creditors
whose claims are guaranteed by certain other Northwest entities will
receive an additional distribution of common stock on their claims.
Because all unsecured creditor claims will not be satisfied in full, the
pre-petition equity holders’ interests in
Northwest’s common and preferred stock will
be cancelled, and those holders will not receive a distribution.
Agreements
The plan will implement the favorably renegotiated aircraft purchase
agreements with Airbus, Boeing, Bombardier, GE Aircraft Engines and
Pratt & Whitney, and new aircraft purchase agreements with Embraer and
Bombardier. The plan will adopt and put in place the restructured lease
and debt obligations for Northwest’s aircraft
fleet and airports and other facilities. All of these agreements will
provide substantial cost savings to Northwest.
In addition, the plan provides for the assumption of the company’s
ratified collective bargaining agreements with each of its labor groups,
except for its flight attendants. Each labor group with a ratified
collective bargaining agreement has a negotiated claim as part of that
agreement. The Association of Flight Attendants does not have an
approved claim because it does not yet have a ratified collective
bargaining agreement. Should the flight attendants enter into a ratified
agreement prior to Northwest finalizing its plan of reorganization, an
approved claim would also be available to them.
Equity/Debt
As noted above, the plan provides for the option to raise exit equity
financing via an equity rights offering. The plan also anticipates that
Northwest may supplement the rights offering by obtaining additional new
equity capital from one or more private equity investors.
Northwest will have the option to convert its existing
debtor-in-possession financing upon its emergence from bankruptcy into
an exit financing facility consisting of a $175 million revolving credit
facility and a $1.05 billion term loan, including a $75 million letter
of credit facility, each of which has a maturity date of August 2013.
Northwest also may elect to proceed with alternative exit financing if
more attractive terms than those under the existing facility can be
obtained.
Timing
The bankruptcy court has granted Northwest an extension until February
15, 2007 to file a disclosure statement providing additional information
and detail regarding the plan. After approval by the court, Northwest
will distribute the plan and disclosure statement to its creditors and
begin a period of solicitation of creditors for acceptance of the plan.
Northwest expects to emerge from Chapter 11 during the second quarter of
2007.
FORWARD-LOOKING STATEMENTS
Certain of the statements made in this news release are forward-looking
and are based upon information available to the Company on the date
hereof. The Company, through its management, may also from time to time
make oral forward-looking statements. In connection with the “safe
harbor” provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby identifying
important factors that could cause actual results to differ materially
from those contained in any forward-looking statement made by or on
behalf of the Company. Any such statement is qualified by reference to
the following cautionary statements. The Company believes that the
material risks and uncertainties that could affect the outlook of an
airline operating under Chapter 11 and in a global economy include,
among others, the ability of the Company to continue as a going concern,
the ability of the Company to obtain and maintain any necessary
financing for operations and other purposes, the ability of the Company
to maintain adequate liquidity, the ability of the Company to absorb
escalating fuel costs, the Company's ability to obtain court approval
with respect to motions in the Chapter 11 proceedings prosecuted by it
from time to time, the ability of the Company to develop, confirm and
consummate a plan of reorganization with respect to its Chapter 11
proceedings, risks associated with third parties seeking and obtaining
court approval to terminate or shorten the exclusivity period for the
Company to propose and confirm a plan of reorganization, to appoint a
Chapter 11 trustee or to convert the cases to Chapter 7 cases, the
ability of the Company to obtain and maintain normal terms with vendors
and service providers, the Company's ability to maintain contracts that
are critical to its operations, the ability of the Company to realize
assets and satisfy liabilities without substantial adjustments and/or
changes in ownership, the potential adverse impact of the Chapter 11
proceedings on the Company's liquidity or results of operations, the
ability of the Company to operate pursuant to the terms of its financing
facilities (particularly the related financial covenants), the ability
of the Company to attract, motivate and/or retain key executives and
associates, the future level of air travel demand, the Company’s
future passenger traffic and yields, the airline industry pricing
environment, increased costs for security, the cost and availability of
aviation insurance coverage and war risk coverage, the general economic
condition of the United States and other regions of the world, the price
and availability of jet fuel, the war in Iraq, the possibility of
additional terrorist attacks or the fear of such attacks, concerns about
SARS, Avian flu or other influenza or contagious illnesses, labor
strikes, work disruptions, labor negotiations both at other carriers and
the Company, low cost carrier expansion, capacity decisions of other
carriers, actions of the U.S. and foreign governments, foreign currency
exchange rate fluctuations, inflation and other factors discussed
herein. Additional information with respect to these factors and other
events that could cause differences between forward-looking statements
and future actual results is contained in “Item
2. Management’s Discussion and Analysis of
Financial Condition and Results of Operations”
of Form 10-Q for the quarter ended September 30, 2006 and “Item
1. Business - Risk Factors Related to Northwest and the Airline Industry”
in the Company’s Annual Report on Form 10-K
for 2005.
Developments in any of these areas, as well as other risks and
uncertainties detailed from time to time in the Company’s
Securities and Exchange Commission filings, could cause the Company’s
results to differ from results that have been or may be projected by or
on behalf of the Company. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. These statements
deal with the Company’s expectations about
the future and are subject to a number of factors that could cause
actual results to differ materially from the Company’s
expectations. All subsequent written or oral forward-looking statements
attributable to the Company, or persons acting on behalf of the Company,
are expressly qualified in their entirety by the factors described above.
Northwest Airlines is one of the world’s
largest airlines with hubs at Detroit, Minneapolis/St. Paul, Memphis,
Tokyo and Amsterdam, and approximately 1,400 daily departures. Northwest
is a member of SkyTeam, an airline alliance that offers customers one of
the world’s most extensive global networks.
Northwest and its travel partners serve more than 900 cities in excess
of 160 countries on six continents.
