TRANS WORLD Airlines (TWA) has run into fierce opposition from some creditors to its restructuring plan, which would see some of the carrier's $1.8 billion debt converted to equity. TWA hopes to reduce its debt by $500-600 million by offering creditors an increased stake in the airline.
A special shareholders' meeting is planned for 30 January, to approve the issue of additional shares, which would increase the creditors' stake from 55% to as much as 70% and reduce the TWA employees' holding from 45% to as little as 30%.
TWA says that its employees, major creditors and equipment lessors have approved the restructuring. Creditors opposing the plan hold about $200 million of the debt in question, secured by collateral which they argue will be worth more if the airline is closed and the assets liquidated.
TWA says that the creditors overestimate the value of the assets that are concerned.
The restructuring plan is part of a cost-cutting effort necessitated by over-optimistic revenue projections used in the re-organisation which led the airline out of Chapter 11 bankruptcy protection in 1994.
So far, the airline has cut annual costs by around $380 million. The debt-for-equity swap would result in improved net earnings of $50 million for 1995, TWA estimates.
Under the proposal, TWA would cancel its order for ten Rolls-Royce-powered Airbus Industrie A330s and its option of ten Airbus A340s, replacing them with additional leased Boeing 767s and McDonnell Douglas MD-80s.
Source: Flight International
