Northwest buys Mesaba Airlines; Mesaba emerges from Chapter 11

By Caroline Salls

Pittsburgh, April 24 - Northwest Airlines Corp. completed its acquisition of Mesaba Airlines after Mesaba Aviation, Inc. emerged from Chapter 11 bankruptcy Tuesday, according to a Northwest news release.

Mesaba is now a wholly owned subsidiary of Northwest.

"Mesaba Airlines has served our customers for more than 22 years and, today, Northwest is pleased to strengthen this long-standing relationship," Northwest president and chief executive officer Doug Steenland said in the release.

"The acquisition of Mesaba by Northwest ensures that our passengers will continue to enjoy conveniently timed flights that connect to the Northwest global network through our three domestic hubs at Detroit, Minneapolis/St. Paul and Memphis."

As previously reported, under the agreement between Mesaba and Northwest, which was included in Mesaba's plan of reorganization:

• Mesaba will have a $145 million claim in Northwest's bankruptcy case;

• Mesaba's current equity will be cancelled and new equity will be issued to Northwest, making Mesaba a subsidiary of Northwest;

• Mesaba will be allowed to monetize its $145 million claim against Northwest through a sale;

• Mesaba released its claims against parent MAIR Holdings, Inc.; and

• Northwest and Mesaba executed a mutual release of claims against each other.

Northwest obtained court approval of settlements with Mesaba and MAIR that allowed Northwest to enter into the stock purchase and reorganization agreement under which it purchased Mesaba's operations.

Creditor treatment

Also under Mesaba's plan of reorganization:

• Holders of miscellaneous secured claims will receive a full recovery through cash collateral for their claims;

• Holders of general unsecured claims will receive distributions, plus interest, of available cash in accordance with a trust agreement under which the company will liquidate its trust assets;

• The equity interest held by MAIR will be canceled;

• Other equity interest holders will receive cash distributions under the trust agreement;

• Holders of priority claims will receive a full cash recovery, paid through a reserve in the trust; and

• Holders of secured tax claims will receive a full recovery in cash or in kind from the trust assets.

According to the order confirming Mesaba's plan, Odyssey Capital Group LLC was appointed as the liquidating trustee, and Hamish David and Michael Carr were appointed to the oversight committee by the official committee of unsecured creditors.

MAIR was expected to make its appointment to the oversight committee at a later date.

Mesaba said its comprehensive restructuring plan reduces costs by $68 million a year, secures its core business with Northwest for the 49 Saab 340Bs and positions the company for future growth opportunities.

Mesaba, an Eagan, Minn.-based Northwest Airlines affiliate, filed for bankruptcy on Oct. 13, 2005 in the U.S. Bankruptcy Court for the District of Minnesota. Its Chapter 11 case number is 05-39258.

Northwest, an Eagan, Minn.-based airline, filed for bankruptcy on Sept. 14, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-17930.

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