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Canadian Airlines
seeks protection
in local filing
The bankruptcy action won't
By Peter Wagner
affect operations or employees,
the firm says
Star-BulletinCanadian Airlines has filed for "ancillary" bankruptcy protection in Honolulu, part of a strategy to protect its assets from creditors in the United States.
The filing in U.S. Bankruptcy Court yesterday followed a debt restructuring filing in the Court of Queen's Bench of Alberta.
The filing, under Canada's Companies' Creditors Arrangement Act, is similar to Chapter 11 bankruptcy proceedings in the United States.
Canadian Airlines said the court action will not affect operations or employees.
The airline filed for court protection after a group of U.S. secured note holders demanded payment of $184 million in debt securities. The note holders include Lazard Freres & Co., the largest investment-banking partnership, and Mass Mutual Life Insurance Co.
U.S. Bankruptcy Court officials in Honolulu yesterday were surprised by the unusual filing, which gives creditors in the United States 20 days to respond to the airline's request for bankruptcy protection during restructuring efforts.
A Chapter 11 filing in the United State automatically puts creditors at bay pending formation of a reorganization plan.
A company spokeswoman, Karen Berkhout, said yesterday that the ancillary action was filed in Honolulu because the company has "significant" business presence in Hawaii. Canadian Air, which flies between Vancouver and Honolulu, has 123 employees in Honolulu, she said.
Air Canada, Canada's biggest airline, is making good on its threat to push Canadian Airlines into court proceedings if the unit's creditors did not make the concessions it sought. Air Canada acquired control of Canadian Airlines in January for $92 million (Canadian), though it didn't assume its $3.4 billion (Canadian) debt.
