Newspaper article St Louis Post-Dispatch (MO)

Twa Files Strategic Bankruptcy Creditors to Get Greater Control

Newspaper article St Louis Post-Dispatch (MO)

Twa Files Strategic Bankruptcy Creditors to Get Greater Control

Article excerpt

Dozens of lawyers followed a 7-foot stack of legal documents into U.S. Bankruptcy Court on Friday as Trans World Airlines filed bankruptcy for the second time in 3 1/2 years.

The bankruptcy was expected and delicately choreographed; the company has been working for a year with its unions, creditors and others to ensure a quick passage through Chapter 11.

The airline could be out of bankruptcy and much stronger financially by August.

TWA's attorneys, union officials and company spokesmen all said that passengers would notice no change in service and that employees would see no change in their jobs. All TWA tickets and frequent-flier miles remain valid.

If all goes as planned, TWA's reorganization plan will erase $500 million in debt and cut interest payments $50 million a year.

Major creditors have agreed to extend their loans or exchange the debt they hold for TWA stock. TWA already has acted to cut expenses.

Employees, who now own 45 percent of the airline, would see their ownership drop to 30 percent as creditors gain greater control over the airline.

"This is what we've been working for for 11 months," said William Compton, president of the Air Line Pilots Association, which represents 2,612 TWA pilots.

"The employees won't notice any difference," Compton said. "Passengers won't notice any difference."

In any Chapter 11 bankruptcy, the first court session is devoted to the steps needed to keep the business in operation.

For TWA, Friday's proceedings were laden with all the melodrama of bread baking in an oven.

Bankruptcy Judge Barry S. Schermer's courtroom was packed with 50 lawyers and executives representing TWA, creditors, employees, the city and others. Although their financial interests sometimes conflict, they agreed on what is needed to keep TWA flying.

The sole witness was TWA's chief financial officer, Robert Peiser. …

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