US Airways Reverses Course; Works out RSA Deal

September 26, 2002 ( - Just after complaining that the Retirement Systems of Alabama (RSA) interfered with its bankruptcy reorganization plans, US Airways said Thursday that RSA would put in $240 million for a 37.5% equity stake in the restructured airline.

According to Reuters reports, the ailing air carrier also said it had agreed with RSA that the Alabama public pension fund would give it $500 million in debtor-in-possession financing. US Airways has been trying to reorganize its finances in US Bankruptcy Court in Alexandria, Virginia.

Also Thursday, the Fort Worth,Texas private equity firm that had been trying to hammer out a financing deal with US Airways announced it was backing out of the deal in favor of RSA.

David Bronner, chief executive of the Alabama fund, had said US Airways is a good investment because the airline has cut costs significantly while in bankruptcy, including deals with labor unions that will reduce annual costs by about $840 million.

Reuters said the financing package also includes a $1 billion collateralized loan backed by a federal guarantee as well as an agreement to restructure debt obligations in US Airways’ aircraft debt-restructuring program.

“As the Alabama agency charged with investing and enhancing the pension funds of thousands of public service employees in Alabama, RSA fully appreciates our approach to protect both the pay and benefits of our employees, and to maintain service,” said US Airways President David Siegel, according to the Associated Press.

US Airways planned to present the plan at a U.S. Bankruptcy Court hearing in Alexandria Thursday.

Earlier this week, US Airways’ lawyers filed papers with US Bankruptcy Judge Stephen Mitchel complaining that RSA’s financing offer was disrupting its efforts to negotiate a restructuring deal with other potential backers.