Alabama's public-employee pension fund, which has helped to finance US Airways as it works to emerge from bankruptcy, is seeking to renegotiate its deal to get more control while making less of an investment in the carrier.
Retirement Systems of Alabama originally offered to pay $240 million for a 37.5 percent stake in the ailing airline, a plan approved by a federal judge in Alexandria in late September.
Yesterday, two weeks before the airline must meet a crucial deadline for filing a reorganization plan in bankruptcy court, David G. Bronner, chief executive of Retirement Systems of Alabama, told a state pension panel that he wants the pension fund to control seven, instead of the previously agreed five, of the thirteen seats on US Airways' board of directors, according to an Associated Press report. He also said the pension fund, which already owned about $340 million in US Airways' debt, wants to pay less for the same stake, receive preferred stock or get some other deal-sweetener.
"We are re-trading the deal," Bronner told the AP. "We want more."
Deborah Thompson, a spokeswoman for US Airways, said discussions with the pension fund were ongoing, but she would not comment on the details. Bronner and other officials at the pension fund could not be reached for further comment last night.
US Airways, the nation's seventh-largest airline, was the first major carrier to succumb to bankruptcy after the Sept.11, 2001, terrorist attacks, rising labor costs and an anemic economy sent the industry into a tailspin.
The Alabama fund's bid beat an offer by private equity firm Texas Pacific Group. US Airways officials were initially skeptical of the Alabama offer since Texas Pacific had made a name for itself in the difficult business of turning around airlines with its resuscitation of Continental Airlines. But the pension fund said its package was worth $50 million more to investors than Texas Pacific's and also provided $500 million in debtor-in-possession financing to keep the airline flying during bankruptcy proceedings.
US Airways asked the federal judge hearing its case for a month-long extension to file its reorganization plan in late November. If Judge Stephen S. Mitchell agrees to the delay at a Dec. 12 hearing, the airline will have until the end of January to submit a new plan. The airline, which sought bankruptcy protection in August, had hoped to emerge from Chapter 11 by March.
US Airways is not eligible for $200 million of the pension fund's pledged financing unless it secures a $900 million federal loan guarantee to back a $1 billion private loan. That federal loan guarantee is in turn contingent on the airline's ability to cut an additional $400 million in annual expenses.
US Airways announced Nov. 26 that it would ask for more wage and benefit concessions from its unions before filing its reorganization plan and that it would furlough 2,500 more employees in the next three months.
The airline has slashed its workforce by a third since last year's terrorist attacks.
Bronner is known as a maverick pension-fund manager who uses the assets he manages to promote economic development in Alabama.
US Airways serves four cities in the state, including Montgomery. More than $1 billion of the $25 billion managed by the Alabama fund is invested in airlines, including $400 million in Delta Air Lines.