But Judge Demands Revision Info

A federal bankruptcy judge may have approved Northwest Airlines' plan outlining its Chapter 11 bankruptcy strategy Monday, but he also demanded revisions be added on information on equity compensation for managers.

Judge Allan Gropper's ruling allows the carrier to seek creditor approval for the plan, which calls for the troubled airline to exit bankruptcy as a "streamlined carrier" with an equity value of $7 billion by the end of June.

"Subject to the revisions ... I find the disclosure statement provides adequate information and should be approved," Gropper said of the disclosure statement. He also requested worker compensation revisions be added, according to CNN Money, including an agreement by Northwest to honor a bankruptcy claim regarding $275 million in special shares owned by workers.

The carrier gave up a management compensation claim and offered to pay about 4,000 nonunion workers a sum of $77.4 million upon bankruptcy exit.

Northwest hopes that by offering concessions, complaints from pilot and flight attendant unions, as well as a group of equity investors, will be appeased. As ANN reported last week, the Association of Flight Attendants had filed an argument with the bankruptcy court complaining they need to evaluate the company's reorganization plan of not only pay issues, but director selection processes as well.

"To the best of our ability, we have attempted to address the objections," Bruce Zirinsky, an attorney for Northwest, told the court. Employees who took pay and benefit cuts during reorganization stand to receive 40 percent of a promised cash bonus when the company emerges from court protection, he said.

The outstanding 60 percent would be issued as new common stock in the company within the next year providing the employee has remained with the company, Zirinsky said.

A committee of unsecured creditors, which acts in the interest of all creditors, has voiced it support of the plan although remaining questions as to equity compensation could dilute amounts awarded to unsecured creditors.

Northwest will give unsecured creditors stock valued at up to 83 percent of allowed claims, according to the approved plan. The carrier is to submit information on management equity compensation by Friday.

Northwest entered into Chapter 11 protection in 2005 and intends to exit with its annual costs down $2.5 billion and its debt decreased by $4.2 billion.

FMI: www.nwa.com