Sun, Nov 26, 2006
ALPA Wants To Cash Out Early
Northwest's pilot's
union has asked management to allow the early sale of part of its
nearly $900 million unsecured claim against the airline. The
pilots, represented by the Air Line Pilots Association (ALPA),
accepted the note -- to become airline stock when Northwest
emerges from bankruptcy -- as part of its agreement to accept wage
cuts.
In an email notification to its members ALPA said the union's
investment banker advised "there is a favorable market for the sale
of ALPA claims at present," according to the Twin Cities Pioneer
Press.
Because the claim won't actually become stock until Northwest is
out bankruptcy, ALPA is obliged to get permission from the airline
before it can sell its claim.
Industry observers appear confused at ALPA's move. It's unclear
what the union gains by selling early. As Northwest has yet to file
a plan of reorganization with the bankruptcy court, buyers would
likely wish to acquire unsecured claims at a discount.
According to Minneapolis Star-Tribune United projected "a rate
of recovery for unsecured creditors in the range of four cents to
eight cents on the dollar." ALPA to its members in September that
rate was somewhat higher.
Aside from the large
block of company stock the airline must pay ALPA a lump sum of
$16.8 upon emergence from bankruptcy. The union already has a plan
to distribute both the stock, proceeds from any sale of stock and
cash from that lump sum. The formula calls for and equal
distribution among all pilots for the first 50% with the remainder
dispersed based on hourly rates and seniority.
Like many employees in the airline industry, Northwest pilots
agreed to pay cuts to help the airline recover from bankruptcy. So
far, those cuts amount to nearly 40% or more than $600 per
year.
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