Northwest Airlines' $1.375 billion debtor-in-possession financing is scheduled to launch today, with Citigroup, JPMorgan and Deutsche Bank at the controls. The deal consists of a $150 million revolver and a $1.225 billion term loan. Price talk is LIBOR plus 2 1/2% on both tranches, according to a banker.
The company filed for bankruptcy in September 2005 due to rising labor costs and an increase in fuel prices. On July 18, Northwest filed paperwork with the U.S. Bankruptcy Court related to refinancing $1.125 billion of existing debt at more favorable terms, which will provide the company access to $250 million in incremental liquidity.
The House of Representatives approved changes to a pension plan July 28, but the bill is still awaiting Senate approval. It is anticipated to vote on Friday, after press time; Congress then adjourns for the summer recess. If legislation is not passed, the airline's unsecured bondholders would stand to lose on their recoveries because pensions would be handed over to the Pension Benefit Guaranty Corp., which in turn could make an unsecured claim that could be pari passu with the unsecured bondholder claims (CIN, 7/21).
Northwest is the world's fifth largest airline with hubs in Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,200 daily departures. Calls to a Northwest spokesman were not returned.