Airline files for Chapter 11 reorganisation

US Airways Group has announced that it has filed voluntary petitions for reorganisation under Chapter 11 of the US Bankruptcy Code.

The airline said the action, which includes certain US Airways Group subsidiaries, will allow the company to effect cost savings from aircraft lessors and financiers and other key stakeholders as a means of ensuring the company’s return to profitability.

The company filed its petitions on Sunday evening in the US Bankruptcy Court for the Eastern District of Virginia in Alexandria. The company’s petitions listed assets of approximately $7.81 billion and liabilities of approximately $7.83 billion. The Court has scheduled a hearing on the company’s first day motions for 10:30 a.m. EDT today, Monday 12 August.

US Airways has secured commitments for $500 million in debtor-in-possession (DIP) financing from a group of institutions led by Credit Suisse First Boston and Bank of America Corp, with participation from Texas Pacific Group, among others.

In a move to strengthen its balance sheet, US Airways announced that Texas Pacific Group has entered into a memorandum of understanding to invest $200 million in the airline.

Under the terms of its memorandum of understanding, Texas Pacific Group will make a $200 million investment in the equity of the airline upon its emergence from Chapter 11 protection.

This investment, which remains subject to continuing diligence and final documentation, competing and/or higher offers, and court approval, would result in Texas Pacific Group owning about 38% of the airline. In addition, Texas Pacific Group would hold seats on the reconstituted Board of Directors when US Airways emerges from Chapter 11 protection.

US Airways Group expects that 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.

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