Tempers flare in
Hawaiian bankruptcy
Hawaiian Airlines' bankruptcy heated up in more ways than one yesterday as a false-alarm fire evacuation delayed the start of the hearing and an altercation erupted between two of the parties afterward.
In between, Bankruptcy Judge Robert Faris denied a motion by three investor groups seeking to form a minority shareholders committee, saying it was a close call.
Faris said his primary reason for denying the motion was that the "plain language" of the bankruptcy code states that the investors must be equity security holders of the company in bankruptcy, which in this case is Hawaiian Airlines. The investment groups of Lonestar Partners LP, Triage Capital Management LP and Norman J. Caris of Caris & Co. are shareholders of parent company Hawaiian Holdings Inc., which is not in Chapter 11 reorganization.
Faris also dismissed an argument from the minority investors that they weren't being adequately represented by Hawaiian Holdings, whose chairman and chief executive officer, John Adams, is under investigation by the Securities and Exchange Commission over a tender offer conducted when he was the head of the airline.
Hawaiian's hearing was delayed when a fire alarm went off in the courtroom during a hearing before the Hawaiian matter. Courtroom spectators and participants were led outside. Construction workers on the fourth floor accidentally had triggered an alarm.
There were near-sparks of a different kind following Faris' ruling when Caris threatened to "deck" Vx Capital Partners co-founder Stephen Compagni Portis in the mezzanine downstairs from the courtroom.
Vx Capital is interested in investing in Hawaiian. Before the incident, Portis said he is among one of the parties being considered by Hawaiian Airlines trustee Joshua Gotbaum and the unsecured creditors' committee as a partner for a joint reorganization plan.
Caris was being interviewed by reporters when he noticed Portis listening. Portis reached to shake hands but Caris refused to shake it. Caris then began calling Portis names and demanded that Portis walk away.
When Portis was slow to leave, Caris told Portis "to take a powder" and threatened to "deck" him if he didn't go away. Portis eventually left, but called Caris "disrespectful," told him "to chill a little bit" and made it clear he wasn't leaving because he was threatened.
Portis said he visited Caris on Kauai a couple weeks ago to see if Caris would be interested in investing in his group, but left realizing that the two have different objectives.
"I told (Caris) he was making a mistake to invest in the equity and that he was going down a path that could likely work against us," Portis said. "Their interests are to do whatever they need to do to get recovery for equity ... and if equity is not in (a reorganization) plan, their objective has got to be to create enough of a nuisance or disruption to extract something even though economically they'd be out of the money. That takes time, energy and value out of the (Hawaiian Airlines bankruptcy) estate.
"I wanted to propose to (Caris) that instead of going down that route, if he wants a piece of the airline, he should work with us. I'm very much committed to having local money and local board representation as part of this group ... But I'd never consider doing business with (Caris) now."
Caris said the three minority shareholder groups, which collectively own more than 17 percent of Hawaiian Holdings, plan to meet tomorrow to discuss their next move. He said filing a reorganization plan is one of their options.
"We have more money than has been proposed by anybody to date," said Caris, a managing director in institutional sales for Caris & Co.
Adams, of airline parent Hawaiian Holdings, issued a statement later yesterday in which he pledged his support to equity shareholders.
"Hawaiian Holdings fully understands the concerns of the thousands of people that have invested in Hawaiian Airlines and stands by our long-held pledge to fairly and aggressively represent the interests of all shareholders," Adams said.
Caris acknowledged that the formation of a minority shareholders meeting was "a long shot" since all the parties, except the SEC, had opposed the motion.
If Faris had approved the formation of a minority shareholders committee, then the airline would have been responsible for paying for the committee's legal counsel, financial advisers and other professional help. That would have increased the airline's monthly consulting expenses, which several experts have pegged around $1 million a month.
"At the end of the day, I think the equity people, investors, shareholders and employees will come out fine," Caris said. "We were hoping to move the process along a little quicker."