Trustee calls for review of NWA merger prospects

[JonnyKnoxville]

Hedge funds that hold a big chunk of Northwest Airlines common stock scored a legal breakthrough Wednesday when the U.S. trustee said the bankruptcy court must appoint an examiner to look at Northwest's merger potential.
The hedge funds, which have been led by Owl Creek Asset Management of New York, have been in a protracted legal battle for months with Northwest management and the committee of unsecured creditors in the airline's bankruptcy case.
Northwest, in objecting to the motion for appointment of an examiner, said the hedge funds are acting "based on the extremely serious -- and entirely baseless -- allegation that Northwest has 'parked' an agreement to merge with Delta Air Lines."
Northwest, in part, said the fund managers assume "that a Delta transaction has been parked because the [restructuring] plan will provide equity in the reorganized Northwest to management." The airline added: "That the [hedge funds committee] can read this as evidence of a secret merger plan is further evidence that the [committee] sees the world through distorted lenses."
Collectively, the hedge funds own about 27 percent of the airline's common stock, which would be rendered worthless under the reorganization plan Northwest management has submitted to the court.
U.S. Bankruptcy Judge Allan Gropper on Friday ordered the hedge funds to publicly disclose their financial dealings in Northwest stock.
"Other shareholders have a right to information [about the funds'] purchases and sales so that they make an informed decision whether this [ad hoc] committee will represent their interests," Gropper wrote.
The hedge funds are appealing Gropper's ruling that they must file public documents about their transactions.
The funds also object to Northwest's request to extend the exclusive period that would allow it to solicit support for its reorganization plan without having to contend with competing plans.
Among many other concerns, the hedge funds argued that Northwest has undervalued itself in bankruptcy.
In its court filing Wednesday, the U.S. trustee did not evaluate the legitimacy of the hedge funds' arguments. Instead, the trustee said a provision in bankruptcy law requires that an examiner be appointed to look at Northwest's merger options because it has unsecured debts exceeding $5 billion.
In a strongly worded objection, the creditors committee said the hedge funds want an examiner to conduct an expedition into Northwest's affairs "in the hopes that the examiner unearths a skeleton in [Northwest's] closet."
Northwest has said repeatedly that it plans to emerge from bankruptcy by June as a stand-alone carrier.
The creditors said the hedge funds have driven up bankruptcy costs by "hundreds of thousands of dollars" since November because the hedge funds forced the airline and creditors to respond to "overly broad document requests and subpoenas."

 

[Flyer1015]

They're pis$ed because Northwest isn't giving them anything after emerging from bankruptcy. They just want some money, or return on their investment? Cry me a river. Take your losses and move on. This merger mentality has to stop! (Until at least the next aviation downturn). This group doesn't care about Northwest future if it merges, they simply want money out of it.

 

[Smarta$$]

They're pis$ed because Northwest isn't giving them anything after emerging from bankruptcy. They just want some money, or return on their investment? Cry me a river. Take your losses and move on. This merger mentality has to stop! (Until at least the next aviation downturn). This group doesn't care about Northwest future if it merges, they simply want money out of it.

I liked PT the clown better.