Pan Am Proposes Reorganization Plan

Pan Am Corp. on Tuesday proposed to emerge from bankruptcy court as a much smaller airline in a reorganization plan that would wipe out the holdings of existing Pan Am stockholders.

However, Pan Am warned that the plan is subject to a number of contingencies. They include debtors being able to pay administrative expenses and claims; settlement of claims by the Pension Benefit Guaranty Corp., the U.S. Air Force and the Internal Revenue Service, as well as renegotiation of labor contracts.

Pan Am noted that it “faces significant uncertainties.” These include continuing substantial operating losses, possible regulatory and governmental delays in completing the sale of assets to Delta and the continued availability of aircraft.

Pan Am, which used to be known as the world’s most experienced airline, struck a deal with Delta Air Lines this summer for Delta to purchase a major share of Pan Am’s assets.

On a steady slide since the late 1970s, Pan Am entered bankruptcy protection in January.

It is expected to be only about one-fourth its former size. While Pan Am will still fly between some major American cities, its primary service in the future will be flying to Latin America and the Caribbean.

Under the reorganization plan filed by Pan Am and its committee of unsecured creditors, all of the company’s capital stock will be owned by Delta and the creditors. Delta would also infuse $50 million into the new Pan Am.

When the plan takes effect, all existing ownership in Pan Am or its subsidiaries, including Pan Am common stock and warrants and options to purchase common stock, will be canceled.

A bankruptcy court hearing has been scheduled Oct. 24 on a statement describing the proposed plan. The company said confirmation of the plan is hoped for by Dec. 5.

Pan Am said the reorganization plan would also be funded through the extension of a $155-million loan from Delta and a $100-million revolving fund for working capital.