TWA Board Approves Purchase by American
The board of Trans World Airlines Inc. on Tuesday approved a plan to file for Bankruptcy Court protection and accept a buyout offer from AMR Corp.’s American Airlines for $500 million plus the assumption of $3 billion of aircraft leases, the Wall Street Journal said.
AMR’s board met separately to approve the TWA purchase and another deal, to buy some assets from US Airways Group Inc. for $1.3 billion, as UAL Corp.’s United Airlines purchases the rest of US Airways.
American would spend $300 million to buy TWA assets and provide $200 million in immediate debtor-in-possession financing, the Journal said in its online edition, citing unnamed sources.
A “person close to the deal” told the paper that American figures TWA’s assets are worth $850 million, and it has about $50 million in working capital. St. Louis-based TWA’s liabilities, excluding the aircraft leases, are about $400 million.
Some TWA assets, which American won’t buy, would be auctioned off for at least $200 million, the Journal said.
American, the world’s second-largest airline, was expected to announce its plans early Wednesday morning, the sources said. American may also hold a news conference in New York.
Donald Carty, the chief executive of Fort Worth, Texas-based AMR, will be in New York today for a previously scheduled luncheon with an industry group.
The deal to buy TWA and part of US Airways would give American Airlines, already the second-largest U.S. carrier, about 25% of the U.S. market for air travel, close to the 26% that United Airlines would hold if it succeeds in buying the majority of US Airways for $4.3 billion.
AMR officials declined to comment on Tuesday, and TWA officials did not return phone calls seeking comment.
The total value of any deal to buy TWA may be difficult to determine. Under the proposed plan, the No. 8 U.S. airline, which has not posted an annual profit in 12 years and has filed for bankruptcy twice, would again file for Chapter 11 bankruptcy protection, sources have said.
According to the Standard & Poor’s credit rating agency, TWA has about $3.6 billion in debt and lease obligations, much of which would be renegotiated as part of the deal with American, which has better credit ratings than TWA.
