Mesaba plan of reorganization confirmed

By Caroline Salls

Pittsburgh, April 10 - Mesaba Aviation, Inc.'s plan of reorganization was confirmed Monday by the U.S. Bankruptcy Court for the District of Minnesota.

According to a company news release, the plan confirmation will allow Mesaba to emerge from bankruptcy in the last week of April.

Under the plan, Mesaba will emerge from bankruptcy as an operating subsidiary of Northwest Airlines, Inc.

"Today's confirmation of our plan by the bankruptcy court validates 18 months of work to make Mesaba a sustainable regional carrier, positioned to become a wholly owned subsidiary of Northwest Airlines," Mesaba president and chief operating officer John Spanjers said in the release.

"We are capable of great things moving forward and that's been demonstrated by the exceptional commitment and professionalism of our employees during this difficult time in our history."

Under the agreement between Mesaba and Northwest, which is included in Mesaba's plan of reorganization:

• Northwest will allow a $145 million claim by Mesaba in Northwest's bankruptcy case;

• Mesaba's current equity will be cancelled and new equity will be issued to Northwest, making Mesaba a subsidiary of Northwest;

• Mesaba will be allowed to monetize its $145 million claim against Northwest through a sale;

• Mesaba will release its claims against MAIR Holdings, Inc.; and

• Northwest and Mesaba will execute a mutual release of claims against each other.

As previously reported, Northwest obtained court approval of settlements with Mesaba and MAIR that allow Northwest to enter into the stock purchase and reorganization agreement under which it will buy Mesaba's operations.

Creditor treatment

Also under Mesaba's plan of reorganization:

• Holders of miscellaneous secured claims will receive a full recovery through cash collateral for their claims within 10 days of the allowance date;

• Holders of general unsecured claims will receive distributions, plus interest, of available cash in accordance with a trust agreement under which the company will liquidate its trust assets;

• The equity interest held by MAIR will be cancelled;

• Other equity interest holders will receive cash distributions under the trust agreement;

• Holders of priority claims will receive a full cash recovery, paid through a reserve in the trust within 10 days of the allowance date; and

• Holders of secured tax claims will receive a full recovery in cash or in kind from the trust assets within 10 days of the allowance date.

According to the plan confirmation order, Odyssey Capital Group LLC was appointed as the liquidating trustee, and Hamish David and Michael Carr were appointed to the oversight committee by the official committee of unsecured creditors.

MAIR will make its appointment to the oversight committee at a later date.

Mesaba said its comprehensive restructuring plan reduces costs by $68 million a year, secures its core business with Northwest for the 49 Saab 340Bs and positions the company for future growth opportunities.

Already, Mesaba said it is moving quickly through the Federal Aviation Administration certification and training process to begin operating the first of 36 Bombardier Canadair Regional Jet 900s for Northwest Airlines.

As a result of its ongoing restructuring initiatives, Mesaba said it has achieved reductions in its fixed costs, vendor costs, aircraft and engine leases and labor costs.

Mesaba, an Eagan, Minn.-based Northwest Airlines affiliate, filed for bankruptcy on Oct. 13, 2005. Its Chapter 11 case number is 05-39258.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.