Northwest Airlines debtor-in-possession financing broke last week, trading lightly but better than expected. The $975 million term loan broke last Tuesday at 100-100 1/2. Not much paper changed hands and one dealer suggested that investors were comfortable with their hold levels on the oversubscribed deal. Its strength in the secondary market surprised some. "Northwest is trading better than I expected," said one portfolio manager. "There is the problem with liquidation and overhanging it is the threat of a flight attendant strike and 250 pricing I thought it was tightly priced given the credit."
In addition to the term loan, the credit includes a $250 million revolver. Both pieces are priced at LIBOR plus 2 1/2%. Citigroup, JPMorgan and Deutsche Bank lead the financing (CIN, 8/11).
U.S. Bankruptcy Judge Allan Gropper ruled that Northwest flight attendants could strike, saying it did not violate the Federal Railway Labor Act. The union gave a 15-day strike notice on Aug. 1 after rejecting a second tentative contract with $195 million in concessions, including cuts to wages and medical benefits, the airline said are necessary to get out of Chapter 11 (8/11).
A Northwest spokesman said the company had appealed the ruling and there was a 1 o'clock hearing last Friday afternoon in U.S. Court. As of Thursday at press time, the flight attendants could begin to strike at 9:01 p.m. Friday night.
Northwest has not specifically discussed what the contingency plans will be in the event of a strike, but the spokesman said it does have plans in place to ensure flights are adequately staffed to meet both Federal Aviation Administration and Northwest requirements. He said the airline plans to operate a normal schedule.