NWA, Delta Bankruptcy Analysis
Little Turnaround Room in Bankruptcy Hangar - Commentary
In most industries it works this way: The successful thrive, and the sick
But in the airline business, it isn't so simple, says the Chicago
The sick take refuge in bankruptcy court, sometimes more than once, surviving
in a smaller, usually weaker form to fly again.
That's the potential scenario underlying Wednesday's extraordinary coincidence
in which Delta Air Lines and Northwest Airlines filed for chapter 11 protection,
becoming the third and fourth major carriers to file for bankruptcy, even
as the overall economy shows signs of strength. Read
the full story.
York Times article today described the U.S. government
unsecured creditor” of Northwest Airlines. Read
Bankruptcy Filing Launches Delta Fight with Workers
Now that Delta Air Lines has filed for chapter 11 bankruptcy protection,
the carrier will have a legal fight on its hands from employees and retirees
seeking to protect their benefits, legal experts said. Delta, the third-largest
U.S. airline, filed late yesterday for reorganization under chapter 11 of
the federal Bankruptcy Code, No. 1-05-bk-17923, Law.com reported today. Click
here for details on Delta’s planned restructuring.
Delta has been in talks with GE Commercial Finance to provide the airline
with $2 billion in debtor-in-possession financing, which would allow the
airline to continue operating after a bankruptcy filing. Industry analysts
said that they expect Delta to pledge virtually all of its remaining unencumbered
assets, such as aircraft, as collateral for the loan.
Delta also could cut
or even abandon its pension plan and health care benefits for retirees
and employees. Such a move likely would lead to a legal fight
from employee groups.
While holders of common stock are likely to see their
investments become worthless, rank-and-file Delta employees and retirees
are also vulnerable
to losses, said Dean Booth, an attorney with Schreeder, Wheeler & Flint
who represents retired Delta pilots. Read the full story.
Bills Take On Urgency with Airlines' New Filings
The bankruptcy filings of two more major airline carriers yesterday
has lawmakers fearing the impact on the nation's pension insurer and calling
for action on legislation overhauling the nation's pension laws, Congress
Daily reported today. Delta Air Lines and Northwest Airlines have not
announced whether they would transfer their combined billions of dollars
of pension liabilities to the Pension Benefit Guaranty Corp. (PBCG), the
government's already struggling pension insurer. If the companies make such
a move, that might plunge the agency further into debt.
The bankruptcy announcements come as Congress turns its attention to legislation
aimed at preventing companies from terminating their pension plans and turning
over their plans to the financially troubled PBGC. The three leading pension
proposals in Congress -- one in the House and two in the Senate -- tighten
rules for all companies that sponsor traditional defined benefit pension
The two Senate proposals, which must be combined before going to the Senate
floor for a vote, include additional help for airlines. The Senate Finance
Committee's version would give airlines 14 years to pay off their pension
liabilities. The Senate Health, Education, Labor and Pensions Committee's
bill also would give airlines 14 years to stretch out their pension payments,
and it included a special provision for Delta, allowing the company to temporarily
freeze its pension plans. The House bill included no airline-specific help,
and Boehner has resisted such provisions. "I'm sensitive to their problems," he
said on Wednesday of the troubled airlines. "But this is about comprehensive
pension reform." Temporary pension legislation adopted in 2003 setting
the rate that companies must use to calculate their pension payments expires
at the end of the year.
Asbestos Fund Bars 9 Doctors
One of the oldest and largest trusts set up to compensate victims of asbestos
exposure has barred payments to claimants who rely on reports by nine doctors
and three X-ray screening companies, the News York
Times reported today.
The named doctors are responsible for tens of thousands of claims submitted
to the trust, which has paid out $3.3 billion to resolve 655,096 claims since
it was created in 1988. The move by the Manville Personal Injury Settlement
Trust is a response to growing concern that some of the claims it receives
are not valid and may even be fraudulent.
Lawyers for Claims Resolution Management Corporation, a wholly owned subsidiary
of the Manville Trust, also said that the company had received a subpoena
from federal prosecutors in Manhattan who are looking into asbestos claims.
The subpoena is an indication that the government's investigation is widening.
The trust's decision could affect current bankruptcy proceedings of companies
coping with asbestos claims and, potentially, legislation mired in Congress
that would set up a massive compensation fund for victims, lawyers said. Read
the full story.
From The Bench - Last Day To Avoid $50 Late Registration Fee
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program features the views of 18 U.S. Bankruptcy Judges from across the
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Section 363: New Developments Including Precision
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Pension and Employee Issues: Reconciling the Interests of Unions/Employees,
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Legal Ethics: Examination of Issues Involving Representation of the Creditors’ Committee,
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• BAPCPA: How Will
the Act Affect Business Bankruptcies, including Reclamation, Preferences,
Exclusivity, Property of the Estate, Plan Modification and Discharge of
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Beyond the simple admonition to get as big a retainer as possible, does
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John G. Loughnane, partner at Gadsby Hannah LLP in Boston, where
he is a member of the business reorganization and bankruptcy group.
Hon. Joel B. Rosenthal, U.S. Bankruptcy Judge for the District
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Paul R. Salvage, partner at Bacon & Wilson PC in Springfield,
Mass., where he focuses on creditors’ rights, loan documentation and
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