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Wednesday, March 17, 2004



Hawaiian owners dissent

A group of minority investors in the
parent company of bankrupt Hawaiian
Airlines want a voice in the carrier's
already-tumultuous reorganization




The cast

Here are the major players so far in the Hawaiian Airlines bankruptcy case:

>> Hawaiian Holdings Inc., the parent company of Hawaian Airlines

>> Boeing Capital Corp., the airline's primary aircraft lessor, and turnaround firm Corporate Recovery Group LLC

>> Hawaiian Airlines pilot Robert Konop

>> Hawaiian Airlines trustee Joshua Gotbaum and a committee of the airline's unsecured creditors


A group that collectively owns between 15 and 20 percent of Hawaiian Holdings Inc. stock filed a motion in U.S. Bankruptcy Court yesterday to gain an independent voice in the Hawaiian Airlines bankruptcy process.

Hedge fund firms Lonestar Partners LP and Triage Capital Management LP, along with Norman J. Caris of investment banking firm Caris & Co., asked Bankruptcy Judge Robert Faris for approval to form a minority, noninsider equity committee.

They said in the filing that their interests were not being adequately represented by John Adams, chairman and chief executive of the parent company and the controlling member of AIP LLC. The motion said that Adams and AIP, which owns just more than 50 percent of Hawaiian Holdings, have interests that conflict with those of other shareholders because of a pending $28 million lawsuit against them.

The minority investors claim in the filing that the median value of the airline based on current earnings, cash and other criteria is $1.5 billion and that the median equity value is $420 million, or about $14 a share. The stock closed yesterday at $3.08.

"Nobody is really being responsible to the minority shareholders, and that includes the Hawaiian Airlines employees, who have 6 or 7 percent of the shares," said Caris, a longtime Kauai resident and the managing director of institutional sales for Caris & Co.

"What these filings are saying is there's more than enough money to take care of the creditors and others," Caris added. "The airline has no long-term debt. It has leasing issues that have to be resolved, but the claims (against the airline) will be settled at nowhere near what they're asking for."

Parent company Hawaiian Holdings, in one of its recent filings, estimated the total amount of creditors' claims against the airline at $250 million to $300 million.

Hawaiian Air Although Caris said it was possible that Hawaiian Holdings could fairly represent the minority shareholders, he said it was time for the independent group to voice its opinion. He said the group hasn't decided yet whether to submit a reorganization plan for the airline.

"We feel we have a right to make a claim to the judge (to have minority investors represented)," Caris said. "So far, everything that's been said, particularly from the Boeing side, wipes out (or dilutes) the equity."

Turnaround firm Corporate Recovery Group LLC and Boeing Capital Corp., the airline's primary lessor, co-proposed a reorganization plan that offered $30 million for 90 percent of the airline and $150 million in notes to the creditors while canceling existing shares.

"Boeing's proposal is thievery at best," Caris said. "(Boeing and CRG) are trying to steal the airline. That's in nobody's interests."

The U.S. Trustee's Office has rejected a written request by the minority shareholders for a committee, the shareholders' filing said.

The minority investors are asking that the motion be heard at an expedited April 1 hearing that already figures to be dramatic. Multiple motions are scheduled to be heard regarding the bidding process for the bankrupt airline.

The minority shareholders said in their filing that they are "parties in interest" to the bankruptcy because they will be affected by the reorganization process. Their motion said there were more than a thousand company shareholders as of March 2003, and that since many investors' shares are held in the name of their brokerage firm, that it was reasonable to assume that the number of Hawaiian shareholders was in the "tens of thousands."

For its part, Lonestar Partners, based in San Francisco, owns just under 5 percent of the company, according to a recent Securities and Exchange Commission filing.

Triage Capital Management, headquartered in Philadelphia, owned 1.6 percent of the company as of a Dec. 31 filing but has bought a substantial number of shares since that time, Caris said.

Caris, a longtime Hawaiian Airlines stockholder, said the investment banking firm, which is run by his son Darren, owns about 7 percent of Hawaiian Holdings' shares.

Hawaiian Airlines filed for Chapter 11 on March 21, 2003, but the parent company did not seek reorganization.

"The failure of the company controlled by Adams/AIP to file a bankruptcy petition on behalf of Hawaiian Holdings has resulted in the disenfranchisement of noninsider equity interests in the Chapter 11 process," the minority shareholders said in their filing.

In another development, the three parties who already submitted reorganization plans, as well as the minority shareholder group, have filed motions opposing a bidding process proposed by Hawaiian Airlines trustee Joshua Gotbaum and the unsecured creditors' committee.

That proposal allows the trustee and committee to select the best bid to reorganize the company and then team up with the winning bidder to file a reorganization plan. The plan then would go before the creditors for a vote.

Hawaiian Holdings, the Boeing Capital-CRG tandem and pilot Robert Konop, all of whom have filed reorganization plans, objected to the trustee's bidding process proposal.

"With the trustee and the committee guarding the hen house, the trustee/committee proposal will likely produce a 'winning proposal' that gives value to unsecured creditors at the expense of equity," Hawaiian Holdings said in its motion.



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