Tue, May 20, 2003
Didn't Fund Pension Plan This Time
The IRS says it's OK -- Northwest Airlines skipped a payment to
its company pension plan. It still owed the plan some $454 million;
it's just not going to put that money away right now, as Northwest
(like all airlines) is realizing the critical need to preserve cash
in the current lousy industry climate.
In lieu of actual money, the airline's 10Q report,
just filed with the Securities and Exchange Commission, says it has
promised assets -- aircraft, engines, routes, slots -- to Pension
Benefit Guaranty Corporation. That way, even the airline were to go
gear-up, Pension Guaranty could sell the assets and put cash into
the fund.
The reasoning behind the arrangement, the company said, was to
avoid bankruptcy. It is said in the industry that Northwest needs
all the cash it can get -- it's supposedly losing over $2 million a
day, right now.
Northwest also filed details of a potential offer to exchange
newly created pass through certificates representing interests in
equipment notes secured by a number of the company's aircraft for
an aggregate of $550 million of outstanding senior unsecured debt
securities of Northwest Airlines, Inc.
Under
the terms of the proposed offer, Northwest Airlines, Inc. intends
to issue $576 million of Class D Certificates, representing
interests in the assets of the 2003-1 Pass Through Trust, which
will acquire a direct or indirect interest in notes secured
directly or indirectly by 69 aircraft owned by Northwest Airlines,
Inc. The registration statement states that $540 million of the
underlying notes will be entitled to the benefits of Section 1110
of the federal bankruptcy code. The unsecured securities that
Northwest Airlines, Inc. is targeting in connection with the offer
are the 8.375% and 8.52% Notes due 2004, and the 7 5/8% Notes due
2005.
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