Hawaiian pilot’s
bankruptcy reorg plan
would bring $100M
Veteran Hawaiian Airlines pilot Robert Konop, a nonunion member with a pending $40 million lawsuit against the company, has submitted a reorganization plan to U.S. Bankruptcy Court that includes $100 million in new capital over a two-year period. The plan was sent by overnight mail and is expected to be filed this afternoon.
Konop, who has been active in the bankruptcy process, became the second party to file a plan following a joint proposal earlier this month from Corporate Recovery Group LLC and aircraft lessor Boeing Capital Corp. Konop's lawsuit, which has been stayed by the bankruptcy, was for unauthorized access to a secure Web site he was using concerning opposition to wage concession demands.
Konop's plan proposes to bring in $25 million from outside investors, generate $25 million from employees in a two-year period from a salary-reduction contribution, raise $25 million to $30 million through an initial public offering and get the remainder from offering ousted Chief Executive John Adams, whose AIP partnership is the majority shareholder, an option to settle outstanding litigation by reinvesting the roughly $17 million he gained from a 2002 stock tender offer into newly issued stock at a rate of $5 a share. That is the same rate that would be provided to employees under the proposed salary reduction contribution program.
All creditors would receive 100 percent payment in a combination of cash and stock over varying lengths of time depending on what option is chosen. There's an incentive built in stretching out the payments over a longer period of time if more stock is accepted.
The offer to Adams represents sort of an olive branch to the chairman and CEO of parent company Hawaiian Holdings Inc. Adams was replaced by a trustee due to questionable financial dealings and is the target of a $28 million lawsuit by trustee Joshua Gotbaum.
Konop said he believes Adams' equity ownership has value in light of recent stock activity, and the settlement, while not essential to the reorganization plan, would allow the company to get out from under the litigation cloud.
Money raised from the employees' 10 percent salary reduction would be offset by a three-year union contract extension and the transfer of approximately 5 million shares of Hawaiian's new stock into employee 401(k) accounts, giving employees company ownership of roughly 20 to 25 percent. Konop's plan also proposes to compensate existing shareholders at a rate of one share of new common stock for each five shares currently owned of Hawaiian Holdings' shares. The plan requires that an IPO be conducted within 15 months.
In addition, Konop said he is part of another group, the 50-member Hawaiian Reorganization Committee, which plans to file its own reorganization plan. Konop said the group, which includes some individuals outside of the airline, won't have a reorganization plan in place for at least a month.
Konop, who said his intent is to make Hawaiian an "ongoing viable entity," decided to file his own plan based on comments made in court by U.S. Bankruptcy Judge Robert Faris.
"A couple times, while I was sitting in open court, the judge mentioned more than once that he wanted open participation," said Konop, a pilot with the airline for nearly 20 years. "He talked about plans in terms of complementary elements. He wanted as much input as possible to pick from available options. I basically took him up on that and offered my two cents."
Konop's plan, which calls for leaving all employee benefits programs and contracts virtually intact, didn't identify who would supply the initial $25 million.
"If the initial money doesn't come in, the whole thing falls apart, but I think I have a good line at the initial money," Konop said.
He plans to have a diverse 11-member interim board of directors during this transitional period that would ensure implementation of the reorganization plan and initiate the IPO within 15 months of the plan's confirmation date.
In addition to allowing current Hawaiian Holdings shareholders to receive one new share of common stock for every five shares of existing stock that they own, his plan allows current owners of Hawaiian Holdings stock to purchase up to one additional share of Hawaiian Airlines' new stock for each share of Hawaiian Holdings stock that they own. Hawaiian Holdings would cease to exist under the plan.
