Proposal touts local
control of Hawaiian
Airlines
An investment group led by a Las Vegas-based airline consultant and a 50-member committee consisting of Hawaiian Airlines employees and small creditors will file a reorganization plan next week that proposes $180 million in new capital for the bankrupt carrier.
The plan will be the fourth filed in less than two months and is expected to be received by U.S. Bankruptcy Court on Tuesday.
Ken Elsey, who has a background in technical services, marketing, operations and leadership, is the principal of Hawaiian Investment Partners Group LLC. The group is comprised of private investors and venture capitalists. The co-proponent of the reorganization plan is the Hawaiian Reorganization Committee, which will participate in the operation and governance of the reorganized airline through the selection of one member on the initial board of directors.
"I believe that our plan embraces the local community," Elsey said.
"It returns Hawaiian Airlines to more local control. That's the whole theme of our plan. Everyone involved with our current group, except me, is either a creditor, equity interest holder or an employee."
Hawaiian Airlines pilot Robert Konop, a member of the committee and the proponent of one of the three other reorganization plans, said the group's plan is "more precise" than the plan he filed.
"It has an elegant balance of equity (for the existing Hawaiian Holdings Inc. shareholders) and capital (from the incoming investors)," Konop said.
"My plan is complementary, but if everything works out, I'll join in with the new plan and withdraw my plan."
Other plans filed earlier were a joint proposal from aircraft lessor Boeing Capital Corp. and turnaround firm Corporate Recovery Group LLC, and a preliminary plan from parent company Hawaiian Holdings.
A hearing to determine the bidding process for selecting a reorganization plan will be heard at 9:30 a.m. Thursday before Bankruptcy Judge Robert Faris.
Under the joint reorganization plan, Elsey would replace the airline's current senior vice president of operations, Norm Davies, and serve as the chief operating officer. The chief operating officer title is currently held by Hawaiian Airlines President Mark Dunkerley. The plan said that Elsey would serve as chief operating officer for at least the first two years following plan confirmation unless removed by a majority vote of the board. Dunkerley's status is not addressed by the plan.
Elsey, who inquired about the Hawaiian Airlines trustee position at the same time that Joshua Gotbaum was being appointed, was employed in 1993 as the vice president of marketing and sales for Aerotest, a Mojave, Calif.-based commercial jet overhaul facility that did maintenance on Hawaiian Airlines' L-1011s.
Among some of his other earlier positions were vice president of sales for Elsinore Aerospace in Downey, Calif., in 1991; vice president of marketing and sales for Burbank Aeronautical Corp. in Burbank, Calif., from 1988-90; president of now-defunct Pacific Interstate Airlines in Las Vegas from 1985-86; and vice president of technical service for Los Angeles-based Pacific East Air from 1984-85.
All creditors would receive 100 percent of their eligible claims, while current shares would be canceled under the plan. Existing shareholders would receive one share of newly issued Hawaiian Airlines stock for every four shares they own of the old stock. The value of the exchange is calculated at $35 million based on an estimated value of the reorganized company.
In addition, venture capitalists and private investors would put in $30 million to $40 million; up to $35 million would come from an initial public offering within 15 months; employees would be allowed to buy back up to $25 million in new common stock through a payroll reduction plan; and creditors, depending upon their class, would be allowed to exchange a portion of allowed claims for new stock in Hawaiian Airlines and/or convertible preferred stock up to a cumulative $50 million.
Also, creditors would have the option of receiving a 9 percent note that would be payable over nine years, or could opt for a combination of stock and the note. Konop noted that the 9 percent note would transform the airline's current liabilities to long-term liabilities and free up $65.3 million in restricted cash that is being held back by credit card companies because of the airline's bankruptcy. The money is in addition to the $94.6 million in unrestricted cash that the airline reported having at the end of last month.
