Aloha averts
takeover to pursue
restructuring

The judge leaves a door open
for a later bid by Nobles' team

Aloha Airlines, dodging a last-minute bid from a buyout group led by former Hawaiian Airlines Chief Executive Bruce Nobles, received approval yesterday to work exclusively with its newfound investors.

But the process was nearly derailed in federal Bankruptcy Court by private-equity firm Perseus LLC, which submitted a $120 million proposal to buy Aloha's assets out of bankruptcy, rather than take the carrier through reorganization. Under Perseus' proposal, Nobles would become the CEO and replace Aloha's chief, David Banmiller.

The hearing initially was set up to rule on a motion by Aloha to set a reorganization plan schedule with the Yucaipa Cos. and Aloha Aviation Investment Group, which agreed last week to invest in the carrier. However, the hearing was extended several hours while arguments were heard on whether an auction should be held to accommodate a competing bid by the Nobles-led group.

Bankruptcy Judge Robert Faris granted Aloha's request to stick with its initial partners. But he left open the possibility that Perseus, which has offices in New York, Washington and San Francisco, could bid for Aloha later if Perseus gets the backing of the airline's unsecured creditors.

Faris said he was surprised the cash-strapped airline has been able to survive this long, and agreed with Aloha that it needs to hasten its emergence from bankruptcy.

"Although the front door may not be open, there is a side door, so if Perseus wants to continue there is an opportunity," Faris said.

Faris also granted Aloha's motion entitling Yucaipa and AAIG to a combined $3 million breakup fee and up to $750,000 in expense reimbursements as protection if Aloha defaults or the court approves a competing deal to buy Aloha. Faris also permitted Aloha to pay Yucaipa and AAIG a combined $250,000 in expenses for work done so far on the reorganization plan.

Former pro football player Willie Gault, manager of Los Angeles-based AAIG, said yesterday he was pleased to work with Aloha's owners, the Ing and Ching families, and the local community "to help preserve this amazing treasure called Aloha Airlines and its 3,600 employees."

Banmiller, who gave Aloha's attorney Paul Singerman a bear hug after Faris ruled in the airline's favor, characterized the outcome as possibly "the biggest step we've taken" since the carrier filed for bankruptcy on Dec. 30.

Nobles, who wasn't in court yesterday, said he and Perseus will decide in a few days if they want to proceed.

"Our primary emphasis with the filing was to let the judge know that we made an offer and are interested in the company," Nobles said. "This is a large private-equity fund, and we didn't think the judge should have an exclusive process. We thought we could open the process up and bring value to the estate, and he allowed that with some limitations."

One of the limits was arrived at during a court recess. Yucaipa and AAIG, anxious to have their reorganization plan schedule approved, agreed to allow Perseus access to Aloha's records.

In return, Perseus would have to deposit $2.5 million with the company and assume $2.5 million of a $5 million loan that AAIG had made available to the airline. In turn, AAIG would deposit $2.5 million with the airline.

Banmiller said his job security was not a factor in his decision to side with Yucaipa and AAIG, which had proposed a $100-million-plus reorganization plan for Aloha. Yesterday the two companies sweetened their proposal by announcing they would give a $2 million promissory note to the airline's unsecured creditors.

"Whatever is the right thing to do is what we're going to do," Banmiller said.

Nobles, whose relationship with Banmiller goes back 20 years to their days with Jamaica Airlines and American Airlines, held the titles of chairman, president and CEO of Hawaiian Airlines from 1993 to 1997 and served during that airline's first bankruptcy.

Now a Dallas-based airline consultant, Nobles has been looking to return to Hawaii. He partnered with Corporate Recovery Group LLC and Boeing Capital Corp. in a failed attempt to buy Hawaiian Airlines during its second bankruptcy, then teamed up with MatlinPatterson Global Opportunities Partners II LP in an unsuccessful attempt to purchase Aloha earlier this year.