TWA IN BANKRUPTCY : NEWS ANALYSIS : Icahn Unapologetic About Chap. 11 Filing : * Profile: The action will wipe out millions of dollars worth of bond holdings, but TWA’s chairman remains feisty--and his fortune is intact.
The performance was pure Carl C. Icahn, and the setting was worthy of a man whose net worth Forbes magazine recently estimated at $660 million.
Here in the gilded Versailles Room of the sumptuous St. Regis Hotel was Icahn, the once-feared corporate raider, holding forth on TWA’s decision to seek court protection from its creditors under Chapter 11 of the bankruptcy code: feisty, combative, unapologetic.
Icahn had been up until 3 o’clock Friday morning, wringing the last concessions from TWA’s bondholders and its workers, striking deals that, he boasted, will “wipe out” $1 billion worth of TWA debt in a “pre-planned” bankruptcy. Now he was holding a press conference to profess his optimism in TWA’s future.
Was Icahn humbled or humiliated by the Chapter 11 filing? “I want to put it euphemistically,” he replied, stressing that the bankruptcy filing was TWA’s and not his personally. “This has been challenging.”
Did he feel bad about TWA’s bondholders losing hundreds of millions of dollars? “If you look around at the whole economy, and the whole scenario--if you look at it from that point of view--this is something that happens,” he replied.
Moreover, he added later in an impromptu interview, “by working day and night, a lot of people think I really saved TWA,” he said. “Look at Pan Am and Eastern,” both of which were forced to stop flying last year. “If you look around at the whole industry, it’s very good we’re still here.”
Icahn may have been overstating his case. Although analysts generally credited him with cutting TWA’s costs to the bone, they also noted that the airline’s service has suffered. And by piling on the debt, they said, Icahn left TWA vulnerable to the economic downturn.
The need to replace TWA’s aging fleet has also raised questions about TWA’s long-term viability, but Icahn insisted Friday that by holding off on new aircraft acquisitions he will be able to strike much better deals than his competitors.
The 55-year-old Icahn, who has made runs at such companies as Phillips Petroleum, Marshall Field & Co., Dan River Inc., Uniroyal and USX Corp., averred that TWA “has been a very poor investment” on which he has lost between $150 million and $200 million. He took control of the airline in January, 1986, after an eight-month battle with its former management.
Icahn, an expert chess player who has compared corporate raiding to “three-dimensional, real-life chess,” retains control of ACF Industries, a manufacturer of railway cars and oil field equipment that he acquired in 1984.
He and his complex web of holding companies also own a junk bond portfolio worth an estimated $500 million, including major stakes in Donald J. Trump’s Taj Mahal casino in Atlantic City, N.J., and Southland Corp., the operator of 7-Eleven convenience stores.
He lives in a 20-room, French-style chateau in Westchester County, ensuring his privacy in the late 1980s through the purchase of two adjacent houses.
Despite his losses on TWA, Icahn appears to have profited handsomely the past two years by nimbly timing the junk-bond market. “He’s made a lot of money in the high-yield bond market--big money, maybe $250 million,” said Ken Moelis, a Los Angeles-based managing director of Donaldson, Lufkin Jenrette Inc., the New York-based brokerage firm.
Icahn said at the press conference--and outside observers agreed--that TWA’s bankruptcy filing wouldn’t likely affect his other holdings.
He has pledged to put $35 million in new equity into TWA if other bondholders balk and will end up owning between 20% and 40% of the reorganized line, down from 90% now. Icahn affiliates will provide up to $200 million in financing, he said, if other lenders fail to come through.
Icahn acknowledged that a new law enacted by Congress last December could cost him big money by keeping him on the hook for TWA’s pension liabilities. “Right now, I don’t believe there’s a liability,” he added, because the pension plan is fully funded.
If the law is upheld, he might have liability, but only under “doomsday scenarios,” such as the liquidation of TWA or the termination of its pension plans.
