Late last week, MAG management filed its plan of reorganization and a related disclosure statement. Your MEC is reserving judgment on this plan until we have had the opportunity to review it thoroughly with our professional advisors, including ALPA staff, outside legal counsel and subject matter experts. If you are interested in reading the 74-page document, please click “here” to download it directly.
In reviewing this plan, keep in mind that MAG has now filed a plan of reorganization during its exclusive period, and under the current exclusivity order, MAG has the exclusive right through December 22, 2010 to solicit votes on its plan if the court approves the adequacy of information in its disclosure statement. The company may well modify its plan and disclosure statement up until the hearing on October 26, to consider the adequacy of the disclosure statement. Revisions to a plan and disclosure statement during this period are not unusual in large bankruptcy restructurings such as the one occurring at MAG, including in reaction to complaints or formal objections from third parties requesting that additional information be provided. Typically, companies will file a plan with the court and thereby begin the process toward reorganization by allowing creditors the opportunity to provide feedback before the plan is finalized.
This communication is obviously not a disclosure statement or a substitute for the disclosure statement. However, to recap the plan briefly MAG’s current reorganization plan contains the following key elements:
• Labor Agreements Assumed
o MAG will assume the ALPA contract in its entirety. This means that the company is not asking for any changes, concessionary or otherwise, to our pilot contract. The company also plans to assume the AFA contract. This also means that all pending and outstanding grievances will be processed per the collective bargaining agreement and paid in full to the extent upheld in arbitration. (Keep in mind that ALPA filed a Section 6 notice earlier this month indicating that we wish to commence meetings under the Railway Labor Act to negotiate changes in our contract. We anticipate meeting with management shortly to formalize a protocol agreement for such negotiations and establish meeting dates and locations.)
• Independent Board of Directors
o The reorganized company will include a nine-member Board of Directors. Six of these members will be appointed by the Creditors’ Committee, and the other three members will be appointed by MAG management. This is a significant change to the company’s current structure. ALPA, like every member of the Creditors’ Committee, is involved in the selection process for the new Board of Directors.
• Ownership
o Ownership of the reorganized company is divided up into three groups:
§ 80 percent will be distributed to various creditors, including Bombardier and Embraer entities and various other credit institutions (foreign creditors may receive warrants for the purchase of stock to buy stock rather than stock)
§ 10 percent will be owned by US Airways; and
§ 10 percent will be owned by MAG management.
• US Airways Codeshare
o As you know, MAG and US Airways have been in discussions to extend MAG’s existing agreement beyond 2013; however, there has been no announcement that the parties have reached an agreement at this time. MAG’s plan states that negotiations were continuing at the time of the filing.
On October 26, the bankruptcy court will review MAG’s written disclosure statement. This is essentially a detailed cover letter or SEC-like document about the plan and MAG; it provides information on what led to the company filing for bankruptcy protection, the value of its assets, present condition of the company, future business prospects, an overview of the reorganization plan, and more. Once the company’s disclosure statement is approved by the court (which requires a finding of whether the information is adequate, not whether the plan can or should be confirmed), impaired creditors (i.e., creditors who will not be paid in full) will receive copies of it and the plan of reorganization so that they may vote on whether to approve MAG’s plan. If any other plan is submitted or if exclusivity is terminated at some point, the court will go through the same process of reviewing the disclosure statement for that plan and sending the information to the creditors for review. A hearing is tentatively scheduled for early December for the court to review and determine whether to approve (technically called “confirm”) management’s plan of reorganization for MAG.
GOOD READ TO UPDATE. ALWAYS DO YOUR OWN DD.
