Hawaiian plan gets
major local investorA Hawaii businessman has
committed $10M, a source says,
to group that made rapid
progress toward deal
It's been nearly two years since Hawaiian Airlines first asked Boeing Capital Corp. for aircraft lease concessions.
The Bruce Nobles-led group, which late Tuesday night became the first party to file a reorganization plan in the Hawaiian bankruptcy case, said yesterday it only required "a few days" to reach an agreement with Boeing Capital.
In a far-ranging conversation at the Star-Bulletin, the principal figures in the reorganization plan revealed that between 25 percent and 50 percent of Capital Resource Group's $30 million cash infusion is locally generated. A source close to the situation pegged the amount as a $10 million commitment from an unidentified Hawaii businessman.
The reorganization group, which began setting the framework for its plan in October, also said the company's new stock initially will be privately traded and criticized Hawaiian Airlines trustee Joshua Gotbaum for trying to make major changes -- such as initiating a Sydney, Australia, route -- while attempting bring the company through organization.
"The lease portion was the first thing we obviously did because that had to be the basis upon which we could do the rest," said Nobles, who was president and chief executive officer of Hawaiian from 1993 to 1997. "I have negotiated many, many aircraft lease agreements in my years, and if you sit down and concentrate on it ... the principal terms can be done pretty quickly."
Scott Scherer, Boeing Capital's vice president and general manager of aircraft financial services, said the aircraft lessor hasn't had any serious discussions with Gotbaum since prior to Dec. 15.
A Hawaiian Airlines official, though, said it was unclear whether Capital Resources Group received a good deal.
"Since Boeing has not made the terms of its leases public, no one knows yet what they are and whether they represent a good deal for Hawaiian or a bad deal," the official said.
Boeing Capital, which had the legal right to repossess its planes under the U.S. Bankruptcy Code following the first 60 days of bankruptcy, already has agreed to seven extensions to continue discussions with Gotbaum over 11 remaining 717s -- representing Hawaiian's entire interisland fleet -- and three 767s. Scherer said Boeing Capital has its hands tied now due to the Capital Resources Group agreement and would be forced to offer Gotbaum another extension, if needed, past the March 15 deadline.
"(Corporate Recovery Group) filed a plan and the key element of that plan is the Boeing fleet of aircraft," Scherer said. "If we pull them out, what is that going to do to Hawaiian Airlines? It's going to create a pretty messy situation. If we pull our airplanes out, I think the whole deal is going to fall apart."
Scherer said, though, that Boeing Capital's terms for restructuring the leases are set now.
"I don't see where it would make any sense for us to negotiate a different deal with the trustee," Scherer said.
"Our view on appropriate market rates are frankly reflected in the agreement that we have with Corporate Recovery Group and Bruce," Scherer added. "I think, in part, because Bruce is an experienced airline executive, he knows that the plan works and we know the plan works. We also know what aircraft are leased for at other airlines because we've got a $10 billion aircraft portfolio, which is comprised of a lot of 717 aircraft. We have other customers who are willing to accept these aircraft if we can't come to terms with Hawaiian Airlines."
Capital Resource Group's $30 million investment would give it ownership of 90 percent of the airline. The remaining 10 percent would be distributed to creditors in the form of subordinated notes, which would be payable over eight years at a market rate of interest; and warrants, which give creditors the right to convert their warrants into stock and own 10 percent of the company. There also would be possible unknown distributions from a litigation trust stemming for a lawsuit against former CEO John Adams and his affiliates. Small, unsecured claims would receive a cash distribution equal to 50 percent of their claims.
Ron Orr, a principal with Capital Resource Group who was the bankruptcy counsel for Nobles in Hawaiian's 1993 bankruptcy reorganization, said the newly issued shares will be privately held and that the company will decide at a later date whether to go public. He said the airline's liabilities make the stock of parent company Hawaiian Holdings Inc. worthless, but estimates the value of what is being offered to creditors at $180 million.
Scherer, expressing his frustration at not being able to reach a lease deal with Gotbaum, lashed out at the trustee's actions.
"If I were the trustee, I would have come in on day one and set up a data room (which provides financial information to serious parties)," Scherer said. "I think he needs to manage the bankruptcy. I don't think that's his agenda."
Scherer criticized the length of time it has taken Gotbaum to get the airline out of bankruptcy and singled out Gotbaum's compensation package, which consists of a $600,000 annual salary; $10,000 a month in living expenses, including a house and a car; and free flight benefits for his family.
"I think his other goal here should be to pursue the claims against the former shareholder (Adams) who was the subject of the trustee motion. That's his job. I don't think he's doing his job."
The Hawaiian official said, though, that the court has agreed with the trustee every time a change has been proposed.
"The last time someone argued to the Bankruptcy Court that the bankruptcy was too slow, the judge disagreed and said, 'We don't want another USAir.' "
Capital Resource Group's filing sets the stage for a bidding process for reorganization plans and the group is seeking a deadline around April 26 for the court to consider qualified bids.
The reorganization plan also proposes to put the process on a fast track and could disrupt Gotbaum's proposed filing timeline, not to mention the plans of other prospective groups.
The Boeing Capital-Corporate Recovery tandem is seeking a Feb. 27 hearing to set up procedural dates with a May 3 confirmation hearing.
Gotbaum, who is seeking $11.2 million in labor concessions, wasn't even planning to file his reorganization plan until early June with a confirmation hearing targeted for September. A Hawaiian official said, though, it's too early to tell what the impact will be on Gotbaum's timetable and whether the court would agree to the Boeing Capital-Capital Resources Group proposal.
