ARLINGTON, Va. (CBS.MW) -- US Airways Group shares plunged 74 percent before being halted Monday after the company filed for Chapter 11 bankruptcy protection as it tries to overcome the damaging effects of the Sept. 11 terrorist attacks and the slumping economy.
Shares traded at 65 cents per share shortly after 9:30 a.m. on the Pacific Stock Exchange, down $1.80 from a close of $2.45 per share on Friday. The stock was halted on the NYSE.
The bankruptcy shook the entire airline sector, which sold off sharply as well. See full story.
The airline said in a statement it expects all its flights will continue and it has secured commitments for $500 million in debtor-in-possession financing from a group led by Credit Suisse First Boston, Bank of America and Texas Pacific Group.
U.S. Bankruptcy Judge Robert Mayer on Monday approved $75 million of the money to be used to keep the airline operating. The spending of the remaining funds will be considered at a Sept. 26 follow-up hearing before the U.S. Bankruptcy Court for the Eastern District of Virginia.
The airline (U: news, chart, profile) filed its petition in Federal Bankruptcy Court Sunday night, listing $7.81 billion in assets and $7.83 billion in liabilities.
"Ultimately, this effort is about our customers, employees, and the communities we serve, as we seek to fix the airline's finances and return to profitability," said US Airways President and Chief Executive Officer David Siegel. "US Airways will continue to operate while we complete our financial restructuring, and our customers should be confident that we will continue service to the more than 200 communities in our network."
US Airways also said Texas Pacific Group has entered into a memorandum of understanding to provide a $200 million investment in the new equity of the airline on its emergence from bankruptcy, which the company anticipates will be combined with the $1 billion collateralized loan backed by the federal guarantee that has been conditionally approved by the Air Transportation Stabilization Board.
US Airways said it expects its court-supervised restructuring will be accomplished on a "fast-track" basis and has targeted emergence from Chapter 11 in the first quarter of 2003.
The Texas Pacific Group deal could end up owning about 38 percent of the airline when it emerges from bankruptcy.
The company said the effects of the Sept. 11 attacks are at the heart of its financial woes, pointing to the closure of Washington Reagan National Airport, higher security costs, plus the economic recession and the cutback in travel.
Siegel was appointed president CEO of the airline in March 2002, with the task of reversing financial losses of more than $1.5 billion over the previous four reported quarters.
Lehman Bros. analyst Gary Chase said in a note to investors that "it's too early to know the outcome" of the bankruptcy, but he noted that the airline has been able to negotiate favorable terms with its labor unions.
"Our current assumption is that the company will emerge from Chapter 11 smaller, but largely intact and more competitive in relatively short order," Chase said.
Also possible is that parts, or all, of US Airways could be sold in a move that would benefit its competitors.
The bankruptcy took some on Wall Street by surprise, since many had expected an out-of-court restructuring for the company.
EDS (EDS: news, chart, profile), a supplier of information technology services to USAirways, said is exposure to the airline is about $140 million.
The two parties have been in discussion about restructuring their relationship and EDS said it expects the talks to continue.
"EDS also expects to continue to provide services to US Airways post-bankruptcy and to be paid for those services," EDS said. The company said it does not expect the restructuring of the IT services agreement "to be material to its results of operations or financial position."
Shares of EDS fell $1.35 to $34.95.
