- The Washington Times - Friday, September 27, 2002

US Airways Group Inc. said yesterday it accepted an offer from Alabama's public pension fund to buy a 37.5 percent share of the bankrupt airline for $240 million, hoping the investor will rescue it from financial collapse.
The Retirement Systems of Alabama (RSA) also said it would loan the Arlington-based airline another $1 billion if it emerges from bankruptcy and the federal government makes good on its tentative pledge for a loan guarantee.
A judge approved the deal yesterday in U.S. Bankruptcy Court in Alexandria.
"It's a strong offer," said Chris Chiames, vice president of corporate affairs for US Airways. He predicted the airline would emerge from bankruptcy "by the first quarter of next year."
Airline industry analysts agreed US Airways had a good chance of regaining financial solvency.
"They seem to be making good progress," said Ray Neidl, an airline industry analyst for the Wall Street investment firm Blaylock & Partners. "I'm very optimistic they're going to come out of this quickly and in a much stronger position."
Nevertheless, steep obstacles to financial solvency remain for the nation's seventh-largest airline.
It listed $10.65 billion in debt and $7.81 billion in assets when it filed for bankruptcy protection Sept. 24. As the company restructures, it is trying to cut $1.3 billion a year in costs with renegotiated labor contracts and the bankruptcy court's permission to be released from lease agreements on airplanes and airport property.
US Airways operates about 313 large "main line" aircraft, consisting mostly of Boeing 737s and MD 80s. Before declaring bankruptcy, about 110 of its aircraft were sitting in storage in the Mojave desert. The airline wants to return them to the companies from which they were leased or purchased to reduce debt.
One of the largest creditors is RSA, which is owed $340 million by US Airways for aircraft financing. In addition to restructuring its debt payments, the pension fund gave US Airways $500 million in debtor-in-possession financing.
Judge Stephen Mitchell released $300 million of the financing yesterday to help the airline continue operating. He plans to decide whether to release the other $200 million next month.
The attorney for US Airways said the RSA bailout would help the airline emerge quickly from bankruptcy. "I think to RSA's great credit, they stood by their word," said John Butler Jr.
RSA also would become the controlling shareholder on US Airways' board.
RSA's offer Sept. 18 to rescue the airline is the second in a month for US Airways. Texas Pacific Group, another of the airline's creditors, offered a $200 million buyout package. US Airways rejected it only because RSA's offer was $40 million higher and included significant loan opportunities.
Mr. Butler said during the court proceeding that other bidders could still beat out RSA if they offer a better financing package.
The deal with RSA prompted Scott Hazan, attorney for a committee of creditors, to say, "A remarkable thing has occurred in the last week."


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