Continental Airlines has renegotiated its $25 million working capital loan and received an extension through the end of 1982 with help from its majority shareholder, Texas Air Corp.
Under the new agreement, Texas Air, which will consummate its control of Continental at the airline's annual meeting March 30, provided a partial guarantee of the renegotiated loan. The loan was obtained in February by the Los Angeles-based airline from a group of eight banks after lenders cut off a $125 million revolving credit arrangement. The loan originally was due on April 30.
"With the agreement, Continental will be able to repay this obligation--our only significant near-term debt--on an orderly basis, out of the company's normal seasonal cash flows or the sale of certain assets," George A. Warde, Continental's president, said yesterday.
Another source added that with the extension on the working-capital loan, Continental won't need to borrow anything more through the end of the year.
In an apparent attempt to stop speculation that the airline is anywhere near bankruptcy, Warde said yesterday that recent media reports questioning Continental's liquidity or cash situation "simply are not true." However, reports on the airline's cost problems and current inability to be competitive are accurate, he added. Continental is negotiating with its three major unions--representing pilots, flight attendants and ground workers--to obtain wage and work-rule concessions designed to save $60 million in costs a year. Significant progress is being made in those negotiations, one source said yesterday. Without those concessions, Continental has warned that it will consider substantial layoffs and a pruning of its route system to bring its costs down to a point where it can weather the recession and the pressures of competition that airline deregulation has brought.
Texas Air, the parent company of Texas International Airlines and New York Air, has held a majority interest in Continental since September. After a lengthy and hostile battle, the Houston-based company cleared the last remaining goverment hurdle to its proposed acquisition when the White House announced in October that it wouldn't overturn the Civil Aeronautics Board's blessing of the takeover. Under Continental's by-laws, however, full control couldn't pass to Texas Air until the next annual shareholders' meeting. That is scheduled for March 30 in Los Angeles.
In proxy materials being mailed to Continental shareholders, Texas Air is nominating a slate of 11 directors that will include only three holdovers from the old Continental board. They are Warde; Richard M. Adams, currently executive vice president of the corporation; and Jay A. Pritzker, chairman of the board of directors of Hyatt Corp. and The Marmon Group Inc.
The materials indicate that Texas Air intends to nominate Robert F. Six, longtime head of Continental who is currently chairman of the board, as chairman emeritus and director emeritus at the first directors' meeting following his retirement. He also will be proposed for election as a director of Texas Air Corp. at the parent company's annual meeting of shareholders scheduled for June 1.