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AIRPORTS COMMISSION, NORTHWEST AIRLINES NEGOTIATORS REACH AGREEMENT ON TERMS OF LOAN TO NORTHWEST

AIRPORTS COMMISSION, NORTHWEST AIRLINES NEGOTIATORS REACH AGREEMENT ON
 TERMS OF LOAN TO NORTHWEST
 MINNEAPOLIS, Nov. 11 /PRNewswire/ -- Agreement has been reached between negotiators for the Minneapolis/St. Paul Metropolitan Airports Commission (MAC), Northwest Airlines, and the State of Minnesota, regarding Northwest's loan request for $320 million for debt reduction and operational uses. MAC executive director, Jeffrey W. Hamiel stated the transaction is linked to an additional $350 million proposed financing for construction of maintenance facilities for Northwest in Duluth and Hibbing/Chisholm.
 Details of the principal conditions and terms of the financings have been provided to MAC Commissioners for their review and consideration, along with Hamiel's recommendation for approval. The chairman of the MAC, Hugh K. Schilling, has scheduled a special meeting of the commission at 1 p.m. Friday, Nov. 15. At the meeting, commissioners will review a report from consultant Price Waterhouse, concerning Northwest's financial condition and its capability to handle the debt service on the loan. An additional special meeting has been scheduled at 1 p.m. Nov. 20 when the commission will consider approval of the terms of the loan and bonding agreement.
 Important details contained in the terms of the proposed agreement include the following:
 -- MAC would issue $270 million in General Obligation Bonds backed by a pledge of payment from Northwest. MAC would also loan Northwest up to $45 million from its special construction fund.
 -- Northwest would pledge collateral at least equal to 145 percent of the outstanding principal balance of the bonds and the loan. The initial amount of the value of the collateral would equal 155 percent of the balances. The collateral package would have a value of $476.3 million, consisting of the Northwest's pilot training center (NATCO), aircraft parts, airport facilities owned by Northwest, and international routes.
 -- MAC would also issue up to $79 million in Northwest Airlines revenue bonds, to be backed by a pledge of revenue by Northwest and a limited pledge from the IRRRB.
 The three transactions (Duluth and Hibbing facilities and the MAC loan), are "cross defaulted" so that a breach of one constitutes a breach of the others. There is also limited cross collateralization. MAC will not proceed with the issuance of the bonds until leases have been executed for the Duluth and Hibbing projects with appropriate bonding and collateral pledges by Northwest.
 Other covenants would require Northwest to continue to maintain its headquarters in Minnesota, maintain employment levels in the Twin Cities at substantially present levels or above, and create at least 1,500 new jobs in northern Minnesota.
 Hamiel indicated that Northwest has also agreed to several noise abatement covenants, including consenting to:
 -- Increased airline funding for off-airport soundproofing programs of up to $2 million per year beginning in 1994.
 -- Limiting the percentage of use of noisier, Stage 2 aircraft at Minneapolis/St. Paul International Airport (MSP) to that of its overall domestic use.
 -- Not exceed the previous year's level of use of Stage 2 aircraft at MSP after 1992.
 -- And contractually agreeing to an 11 p.m. to 6 a.m. curfew on scheduled Stage 2 aircraft landings or takeoffs.
 MAC will be the construction manager for both the $250 million Airbus A-320 Maintenance Facility in Duluth and the $100 million engine overhaul facility at the Hibbing/Chisholm Airport. The Duluth facility will be owned by MAC on land leased from the City of Duluth.
 The MAC bonds may only be issued after approval by the MAC commissioners, the Legislative Commission on Planning and Fiscal Policy and the State Commissioner of Finance.
 "The Airports Commission will carefully review the report by MAC's consultant, Price Waterhouse, as part of their consideration and approval process," Hamiel said.
 The report says, "...Northwest has recently incurred large losses, continues to hold a large portion of its acquisition-related debt, and has little equity. In addition, its prospects for the future are dependent on many circumstances that it does not control. Given its current position, management has outlined a financial plan and expense reduction and financing alternatives should the plan not be achieved."
 Hamiel pointed out that while Price Waterhouse believes there may be "substantial risk" associated with the financings, it notes that the risks can be mitigated through an appropriate combination of collateral, financial covenants and repayment provisions.
 Hamiel stated that it is the view of MAC staff that the conditions outline by Price Waterhouse have been met in the negotiated terms.
 "Most important," Hamiel said, "is Price Waterhouse's conclusion that assuming the occurrence of certain specified conditions and achievement of certain results, the future financial condition of the company should allow Northwest to continue to meet its financial obligations over the remaining period of the financings."
 Hamiel commented that MAC agreed to consider the unique request because of the significant economic impact Northwest's operations and presence have on the region.
 "It is not only the 1,500 new jobs in northern Minnesota, nor the 17,000 jobs Northwest presently affords," Hamiel said, "it is also the positive economic effect of the 67 non-stop destinations provided by Northwest's hub which has enabled the Twin Cities to exceed national averages in economic growth, attract large corporate headquarters, and create jobs directly and indirectly related to air transportation services.
 "We recognized from the outset that this financing was not a typical commercial lending request," Hamiel concluded, "but because of the potential regional benefits of the continued presence and growth of Northwest, and the value of pledged collateral in excess of the amount to be loaned, MAC staff recommends that the commission approve the financing as negotiated."
 -0- 11/11/91
 /CONTACT: Bob Stassen of Metropolitan Airports Commission, 612-726-8169/ CO: Metropolitan Airports Commission ST: Minnesota IN: TRN SU: CON AL -- MN012 -- 3022 11/11/91 12:05 EST
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Date:Nov 11, 1991
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