Creditors reject Canadian's plan - should I be worried about my points?
 

Not to mention the nightmare with AMEX, but more stress for CDN Plus pointsholders (myself included):


NP says creditors reject Canadian's plan

Canadian Airlines Corporation
CA
Shares issued 40,684,864
2000-04-26 close $0.7
Thursday Apr 27 2000
Also Air Canada (AC)
The National Post reports in its Thursday, April 27, edition
that Canadian Airlines' financial restructuring plan has been
given a rude reception, with secured creditors rejecting it
immediately and unsecured creditors vowing to sue. The
National Post's Peter Fitzpatrick writes that the airline, which
is controlled by Air Canada, filed its plan of arrangement for
restructuring its $3.5-billion debt with an Alberta court late on
Tuesday. The plan is supposed to be voted on by creditors on
May 26, but within hours a majority of the secured creditors
had already voted against the proposal. A lawyer representing
the holders of Canadian's secured $175-million (U.S.) bonds
said his clients voted to reject the plan at a formal meeting in
New York yesterday. Under the plan, the secured noteholders
would see the principal of their notes cut to about
$162-million and the interest rate reduced. The group also
reconfirmed its intention to go to court on May 3, to have
Canadian's protection under the Companies' Creditors
Arrangement Act lifted so assets can be seized.
(c) Copyright 2000 Canjex Publishing Ltd.
http://www.canada-stockwatch.com

This game goes on all the time in bankrupcy proceedings. Bondholders always reject such offers and try to go to court. That doesn't mean they will win, it is just a delaying ploy. Afterall, they bought the bonds knowing the plight of CP. There is a booming U.S. industry in buying "junk" debt and trying to hardball in bankrupcy court. It is the aircraft owners CP/AC have to worry about, and they appear to be on board and prepared to renegotiate contracts. If CP/AC manage to renegotiate all of their key operating contracts, they will defacto have reorganized CP's finances so bondholders are totally marginalized in the process. (Amex wasn't willing to renegotiate -- according to what we've been able to glean from various postings of the past few days -- and they were dumped by CP/AC and now are suffering accordingly. Air Miles was and they will continue their CP relationship, and expand it with the addition of AC.)

I don't believe you have anything to worry about vis a vis your Cdn+ points, since AC is on record as part of their deal to honour Cdn+ points. If they don't make good on that pledge, you will have Ottawa coming down very hard on them (remember, MPs are all SuperElite/ExecPlatinum members of both programs since they fly so much and they are in the same boat you and I are in, even more so!). I know, you say, we cannot trust Mr. Milton, but the new legislation does have a nice little jail sentence for AC execs if they go back on their word on merger details.

If you have a lot of points (i.e. 100K+) and need more assurance, then check out the Webflyer portion of this site, and search out AwardGuard. For about $125 annually, you can insure you account.

Or cash them in on an AC ticket booked for sometime early next year to the furthest destination you can go on the points you have, then after the dust settles you can cancel the booking and redeposit the points into your "safe" Cdn+ account. Since the flights are on AC, if CP collapses (highly unlikely in my mind), the tickets will still be honoured on the operating carrier, AC. Once a ticket is issued, even an FF one, you have one year to use it, or cancel the booking and redeposit the points into your account.

Absolutely on the mark, Shareholder.

These creditors are probably the same ones who took the actions that caused Canadian to seek protection anyway. They are trying to manouver AC into reducing the discount, improving the interest rate, or sweetening the guarantee.

It's a form of bargaining engaged in by people who routinely behave in three-year-old-mode. http://www.flyertalk.com/forum/smile.gif

A Calgary judge dismissed a claim by secured note holders against CP. They did receive leave to appeal, but it is unlikely to change the decision. The "vulture funds", who have bought up unsecured CP notes, appear before a Calgary judge on Monday. This is the one to watch, but the business world has little sympathy for these guys, wonder how the courts will feel. Given the results of the secured creditor's court action, it would appear this group will approve the reorganization plan when it is voted on next month.

Still a few more shoes to fall in this story yet.