U.S. Bankruptcy Court Judge Stephen Mitchell approved US Airways Group’s agreement with Republic Airways Holding…
…and its majority shareholder, Wexford Capital LLC, on an equity and financing package that includes a $125 million investment upon US Airways’ emergence from Chapter 11, in addition to options for obtaining $110 million of other liquidity enhancements that would be available prior to emergence to assist the airline in completing its restructuring.
“The court’s approval today builds momentum toward the successful implementation of our Plan of Reorganization and emergence from Chapter 11,” said Bruce R. Lakefield, US Airways president and chief executive officer. “This agreement with Republic is another important step in our efforts to raise sufficient capital to remain a strong competitor in the marketplace.”
The agreement is contingent on US Airways securing $350 million in new cash investment (including the $125 million from Republic and the $125 million previously secured from Eastshore Aviation, LLC) to finance the US Airways Plan of Reorganization (POR), and other conditions. It also provides for representation on the US Airways board of directors, and requires US Airways to amend and restate its existing jet service agreement with Chautauqua, to assume that agreement and to enter into a new jet service agreement with Republic for regional jet (RJ) feed using the Embraer (EMB) 170 and 190 aircraft under the US Airways Express brand.
In addition, the agreement includes options for additional US Airways financing subject to the consent and approval of the Air Transportation Stabilization Board, including:
* US Airways may exercise an option to obtain approximately $110 million through the sale of certain assets, including 10 EMB-170 aircraft owned by US Airways; three EMB-170 aircraft currently committed for delivery to US Airways; other EMB-170-related assets; 113 commuter slots at Ronald Reagan Washington National Airport; and 24 commuter slots at New York’s LaGuardia airport.
* US Airways would assign to Republic leases for an additional 15 EMB-170 aircraft, and would work with Republic to locate an Embraer heavy maintenance facility at an agreed upon location within the US Airways network. Republic would enter into an RJ service agreement that would continue the operation of the aircraft as US Airways Express. Republic also would simultaneously lease back the Washington and LaGuardia slots to US Airways. At any time on or after the second anniversary of the slots sale/leaseback agreement, US Airways would have the right to repurchase the slots at a predetermined price.
* After the effective date of US Airways’ Chapter 11 POR, if US Airways does not exercise the slots sale/leaseback option, Republic could purchase/assume debt and leases for all 28 EMB-170 aircraft and to fly them as US Airways Express. The net effect would be the sale of US Airways’ MidAtlantic aircraft to Republic. If either option is exercised, Republic will comply with the applicable provisions of all existing agreements with US Airways regarding MidAtlantic. The aircraft would continue to fly under the US Airways Express brand, operated by Republic.
The court also extended until May 31, 2005, the date for US Airways to have exclusive rights to file a POR. The request was supported by the company’s unsecured creditors committee and was unopposed by other interested parties.
murdok | Breaking eBusiness News
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