MAIR agrees to defease hangar facility bonds, terminate ground lease

By Caroline Salls

Pittsburgh, Aug. 19 - MAIR Holdings, Inc. has closed on an agreement with UMB Bank, NA and the Cincinnati/Northern Kentucky International Airport to defease the bonds associated with the company's hangar facility at the airport and terminate the related ground lease, according to an 8-K filed with the Securities and Exchange Commission.

According to the filing, MAIR's former subsidiary, Mesaba Aviation, Inc., leased the facility at the airport before its October 2005 bankruptcy filing but vacated the facility and stopped making the required lease payments on it in November 2005.

In accordance with its guaranty, MAIR said it has made all required bond and ground lease payments due since November 2005.

In April 2006, in exchange for the bondholders forbearing acceleration of the bonds, the company delivered a letter of credit to the bondholders to assure payment of the bonds, the filing said.

Mesaba subsequently assumed and assigned the related ground lease to MAIR, and the airport agreed to the assignment of the ground lease.

Under the defeasance agreement with UMB, MAIR said it used the cash account collateralizing the letter of credit to fund the defeasance of the bonds, effective July 1, 2009, the first date a voluntary prepayment is allowed under the bond documents.

In addition, MAIR and the bondholders agreed to release all claims against each other, and MAIR agreed to pay the airport all rental and maintenance amounts due under the ground lease through June 30, 2009.

In exchange, the airport has agreed to terminate the ground lease effective Dec. 31.

MAIR said its guaranty also required it to pay the legal and administrative expenses of the bondholders in connection with the transaction, and MAIR's restricted cash provided enough funds to defease the bonds and pay all required legal and administrative expenses.

Minneapolis-based MAIR operated as a holding company that offered regional air carrier services.

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