US Airways objects to proposed investment from pension fund
ALEXANDRIA, Va. (AP) – US Airways is objecting to efforts by Alabama’s public pension fund to buy a 38 percent share in the bankrupt airline. Court motions filed Tuesday by US Airways say the Retirement System of Alabama is improperly interfering with US Airways’ plans.
US Airways “is entitled to a reasonable time to propose a plan of reorganization without the threat of improper interference from creditors,” the airline says in its motion.
Nothing in US Airways’ motion states that it would ultimately reject the pension fund’s proposed $240 million investment; instead, the airline claims that the Alabama fund is prematurely meddling with the airline’s decision-making process.
When US Airways filed in August for Chapter 11 bankruptcy protection, it also announced that the Texas Pacific Group, a venture capital fund, had agreed to invest $200 million in the airline in return for a 37.5 percent stake in the company, although the deal allows for other would-be investors to make a better offer.
Last week, the Retirement System of Alabama offered $240 million for an equal 37.5 percent share of the airline. The fund also filed court papers seeking to alter the bidding process, arguing that the terms sought by US Airways would essentially rig the outcome in favor of Texas Pacific.
The pension fund’s lawyers also pointed out in their papers the close relationship between US Airways President David Siegel and David Bonderman, who leads Texas Pacific Group. Siegel once worked for Bonderman, he was chairman at Continental Airlines. Bonderman appointed Siegel to lead that airline’s Continental Express division.
The pension fund argues that the relationship “cast(s) doubt on whether the Debtors (US Airways) can fairly evaluate competing bids.”
Texas Pacific, which specializes in buyout offers, also holds a stake in America West Airlines and is in the process of acquiring Burger King.
Siegel has said Texas Pacific would be a good partner because of its history of friendly relations with employees.
US Airways in its motion argues that federal bankruptcy law gives the airline until Dec. 9 to develop its own reorganization plan without interference from creditors like the Alabama pension fund.
The Alabama fund, with about $25 billion in assets, already holds more than $340 million in US Airways debt, according to its chief executive, David Bronner. He said US Airways is a good investment because the airline has been able to cut costs significantly while in bankruptcy, including deals with labor unions that reduce annual costs by about $840 million.
US Airways officials declined to comment on their motion.
A hearing is scheduled for Thursday in U.S. Bankruptcy Court, at which a judge is expected to outline the procedures under which alternate bidders like the Alabama pension fund can seek to supplant the Texas Pacific bid.