Carrier Plans To Exit Chapter 11 In Q2 2007

We have a race on our hands... a race to determine which airline, Delta or Northwest, exits bankruptcy first. On Thursday, Northwest Airlines presented its disclosure statement to the US Bankruptcy Court, detailing its plan to emerge from Chapter 11 sometime in the second quarter of this year.

Reuters reports Northwest placed its valuation at close to $7 billion, and that unsecured creditors would be offered stock in the airline valued at up to 83 percent of those companies' approved claims.

"We are confident that our plan treats our creditors fairly, and we look forward to working with them to obtain their support for our reorganization plan so that they can receive their recovery as quickly as possible and Northwest can move forward on a sound economic footing," said Northwest CEO Doug Steenland.

The plan still needs approval by creditors at Northwest, and then be signed off by the court.

Northwest -- which filed for bankruptcy in September 2005, on the same day as similarly troubled Delta Air Lines -- has cut overall costs by $2.4 billion, according to Reuters. The airline has also reduced its debt load by $4.2 billion.

Next up for Northwest is a court hearing on its disclosure statement, scheduled for March 26. As ANN reported, Delta cleared that hurdle earlier this month.

The plan also calls for Northwest to cancel its current shares, and sell $750 million in new common stock -- with unsecured creditors having the first opportunity to purchase those shares.

"I can't speak for the creditors committee, but to me it looks like a fair plan," said Calyon Securities airline analyst Ray Neidl.

Employees would receive a 20 percent stake in the carrier... although one analyst notes it is unclear how much of that compensation will be held for managers.

"Its hard to know what the distribution of that is," said airline consultant Robert Mann.

FMI: www.nwa.com