US Airways Dividend Miles (Pre-2005 America West merger) - Feds Head for the Door
Sep 25, 05, 6:51 pm
Friday announcement that the government loan guarantee people want to sell both the AWA and US loans. That usually means "discount". They would also like the new company to buy back the convertible warrrants the government have. These can be converted to common stock, which would dilute other holders. Looks like the escape hatch is open. In any case, I doubt they're looking to trade them for lifetime memberships in the USAirways Club. :D
Sep 26, 05, 5:54 am
Well, there's also the thing about the Feds wanting to get out of the airline loan guarantee business altogether, so they can avoid the politics of the whole thing - for example, not have a scene where Dennis Hastert is lobbying on behalf of United to get a loan guarantee. So, I'd imagine they want to sell not only US and HP's loans, but the others they guaranteed as well.
Sep 26, 05, 10:29 am
I believe the article I read mentioned that these two were the only ones left on the books. As I recall, some carriers backed off taking the money, after learning they would lose their equity in a failure, which would have precluded their ability to bankrupt, and thus keep thier businesses while screwing investors, creditors, and employees. It seems your government has a different view of that process when it is more directly involved.
Sep 26, 05, 4:45 pm
They would also like the new company to buy back the convertible warrrants the government have. These can be converted to common stock, which would dilute other holders.
yes, in HP's case they got warrants for roughly 1/3 of the pre-merger, post-dilution equity. that's about 10% of the combined firm. tack on the 8% PBGC is sitting on via the old US Airways, and taxpayers own about a sixth of the merged firm equity on a fully diluted basis. that's too many eggs in a basket predicting "substantial losses" for at least the next year.
Sep 26, 05, 9:15 pm
Here's not quite the story I read - but it does note that the ATSB wishes to sell off all its loans.
ATSB says to sell US Airways, America West loans
Fri Sep 23, 2005 8:26 AM ET
WASHINGTON, Sept 23 (Reuters) - The U.S. Air Transportation Stabilization Board on Friday welcomed US Airways' <UAIRQ.OB> planned emergence from bankruptcy protection and merger with America West <AWA.N> and said it would sell the airlines' loans to private investors.
"The board is working with a financial adviser to assess the remarketing of the two loans to private investors without the government guarantee and to gauge the marketability of the board's warrant to purchase shares in New US Airways," the board said.
It said it is receiving the warrant to buy shares in the merged company as part of compensation to the government for giving America West a loan guarantee in 2002.
The board said it was also looking at strategies to sell its remaining warrants in World Airways <WLDA.O> and Frontier Airlines <FRNT.O>.
Sep 26, 05, 9:19 pm
From the Saturday edition of the Charlotte Observer:
http://www.charlotte.com/mld/charlotte/business/12729542.htm (free registration required)
Panel considers changes
The federal panel that guarantees loans to US Airways and America West signaled Friday that it wants to get out of the business of guaranteeing loans to airlines.
The Air Transportation Stabilization Board said it has hired a financial adviser to investigate selling the two airlines' loans, which are issued by private lenders but backed by the ATSB. New lenders would buy the loans without the guarantee. The board is also exploring the possibility of selling its options to buy stock in the new airline.
The tactic could fully remove political pressures from future decisions about the airlines' fates. It's unclear how much money the ATSB might make off the loan sale.
The merged airline will owe lenders about $1 billion in loans now backed by the ATSB. The agency was formed after the Sept. 11 attacks to aid ailing airlines.