Delay in Action May Mean Eastern’s Sale Near
The expected appointment of a bankruptcy examiner for Eastern Airlines was put off Tuesday amid reports that a deal is near for the sale of the airline.
There would be no need for an examiner if Eastern, crippled by a strike since March 4, is sold and comes out of bankruptcy soon to resume full operations.
Neal S. Mann, assistant U.S. bankruptcy trustee for the Southern District of New York, said in an interview that the parties involved in the bankruptcy had asked for the postponement of the appointment until a meeting can be held today in the chambers of U.S. Bankruptcy Judge Burton R. Lifland here.
Mann declined to say why the appointment had been postponed. But well-placed sources said the parties--presumably the airline and its creditors--have reached some kind of agreement. “They seem to have laid the groundwork for some kind of a purchase (of the airline),” one source said.
However, another source said it is possible that Eastern’s management pushed for the delay in hopes of quickly obtaining a ruling from a federal judge in Miami ordering the company’s pilots back to work. The overwhelming support the pilots have given Eastern’s striking machinists has been a critical element in bringing Eastern operations to a virtual halt.
Hearing Scheduled
The company has asserted that the pilots are waging an illegal strike of their own and are not simply observing the machinists’ union picket lines, a charge the pilots deny. If the pilots were ordered back to work, it could give Texas Air, Eastern’s parent company, more leverage in dealing with the unions and possible buyers.
Late Tuesday though, Lifland issued a show cause order requiring U.S. Trustee Harry Jones to explain why no examiner had yet been appointed. Lifland set a hearing on the matter for 2 p.m. today.
“My surmise would be that the judge wants to move the process along,” said a source close to the Air Line Pilots Assn., referring to the possibility of a sale of Eastern.
“Be alert, bright and early tomorrow morning,” a source close to Peter V. Ueberroth told a reporter Tuesday. Ueberroth, whose term as commissioner of baseball expired Saturday, last week bid $464 million for Eastern but was told that a “materially higher” bid for the strikebound carrier had been made by Chicago hotel magnate Jay A. Pritzker.
A spokesman for Ueberroth said then that he had withdrawn from the bidding, but it seemed clear Tuesday that his interest in a purchase was still strong. Despite Pritzker’s higher bid, sources said that while $200 million of Ueberroth’s bid was cash, only $100 million of Pritzker’s $500-million bid was cash and that the prospects of a Ueberroth purchase had returned to the front burner.
Firm Sought Examiner
Still, another source cautioned: “With Lorenzo, until the last signature is on the page, there’s no deal.” He was referring to Frank Lorenzo, chairman of Texas Air, who has been reported to have ambivalent feelings about selling Eastern, despite its fragile financial condition.
Lifland last month ordered the appointment of an examiner. Eastern made the original request to the judge for such an official in hopes that Lifland would appoint an examiner rather than a trustee.
A trustee could be empowered to take over the company’s operations while it is in bankruptcy proceedings. Eastern filed for protection from creditors under Chapter 11 of U.S. Bankruptcy Code on March 9, five days after the strike by the International Assn. of Machinists began.
Eastern’s pilots and flight attendants have overwhelmingly honored machinists’ picket lines, bringing Eastern operations to a virtual halt.
In ordering the appointment of an examiner, however, Judge Lifland said that official would be given broader powers than Eastern expected, though less power than Eastern’s unions would have liked. The examiner would be expected to review certain of Eastern’s financial transactions, to bring management and its creditors together and try to help end the strike.
A 15-member, court-appointed creditors committee, which is representing all of the airline’s unsecured creditors, let it be known Monday that it wanted potential suitors to come forth with their offers at a committee meeting Tuesday.
Some Bids Received
“Progress was made in general at the meeting of creditors,” Mann said, but he declined to be more specific. The meeting was closed to the press.
Ueberroth, Pritzker and Carl C. Icahn, a New York financier who is also chairman of Trans World Airlines, are known to be interested in buying Eastern. Sources said some bids were received but that none of the three attended the meeting.
Representatives of the three known bidders all declined to comment Tuesday.
Ueberroth’s offer for Eastern was for the entire company, including the lucrative Northeastern shuttle operation. However, Eastern agreed late Friday to sell the shuttle to New York financier Donald J. Trump for $365 million. Trump will get 21 jets as part of the deal, which must be approved by the bankruptcy court.
In other developments Tuesday:
Texas Air said in an announcement from its Houston headquarters that it would not be paying the quarterly dividend on its four outstanding issues of preferred stock.
Lifland gave final approval to Eastern’s sale of three Boeing 727s to Federal Express. The planes are part of a transaction that had been agreed upon before Eastern declared bankruptcy. The other seven had been delivered earlier. Eastern got $10.8 million for the three planes, a spare engine and a power ground unit.
America West, based in Phoenix, said it remained interested in buying some of Eastern’s landing slots and gates at Washington National Airport and at New York’s LaGuardia Airport. These are two of the four U.S. airports that restrict the number of available slots and gates.
Robert E. Dallos reported from New York and Henry Weinstein from Los Angeles.
