After avoiding Chapter 11 bankruptcy earlier this summer, airline company Midwest Express Holdings is now seeking either new lenders or equity-based financing. The new financing will probably be from an asset-based or equity-based source, rather than a bank loan, according to Robert Bahlman, cfo. "We think it is hard to get in our industry right now," Bahlman said of why the company is not going the traditional bank loan route. "We've done some work [exploring traditional bank debt as an option] but we think that if we got alternate financing we'd rather do that." He declined comment on how much Midwest needs or which institutions it is speaking with.
Milwaukee-based Midwest extended its existing credit facility with US Bank, M&I Bank and Bank One through Nov. 26 to give the company time to find long-term financing. According to Bahlman, the new funding will be used for maintenance and working capital purposes, and to improve liquidity. He said Midwest is still evaluating its alternatives. "It really depends on what's available. With equity-based financing you dilute existing shareholders but you don't have any interest payments or debt repayments. On asset-based financing, you don't dilute existing shareholders but you have interest payments and long-term debt repayments," he pointed out.
Midwest announced in July that it had successfully negotiated cost-saving measures with labor unions and airplane lessors, thereby avoiding a bankruptcy filing. While Midwest does not plan to return to its bank group for financing, Bahlman has been pleased with the banks' relationship with Midwest. "We've certainly blown a few covenants and they worked with us to make sure we cured the defaults," Bahlman noted. Midwest repaid in cash all borrowings under their previous credit, which was due to expire on Aug. 30, leaving $15.8 million in letters of credit outstanding. The initial facility was a $55 million revolver that has been paid down over time. Calls to US Bank, M&I Bank and Bank One officials were not returned.