USAirways Cuts A New Deal With Alabama Fund

December 6, 2002 ( - US Airways Group has agreed to some new terms with its new lead investor, the Retirement Systems of Alabama - including giving the RSA the ability to fill a majority of board seats in a reconstituted airline.

The airline’s management has also surrendered 2% of its planned 10% equity stake in the company to appease unhappy, unsecured creditors, according to a report in the Associated Press, citing David Bronner, head of the Retirement Systems of Alabama.

The move awarded RSA two more board seats than it had initially secured, and the seven seats will give the pension fund a majority block of the 13 seats on US Airways’ board of directors upon its emergence from bankruptcy.

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RSA has pledged to provide US Airways with $500 million in emergency financing to keep its operations running in bankruptcy, along with $240 million for a 36% stake in the company once it emerges from the bankruptcy courts, according to Reuters.  

In addition, the $25 billion Alabama pension fund has offered to put up $75 million if necessary to help the airline secure final approval for a desperately-needed $900 million federal loan guarantee.   The request for financial aid from a government board, which would come in the form of a 90% guarantee on a $1 billion loan, has been granted conditional approval.

US Airways’ unsecured creditors are now poised to receive a 10.5% equity stake in the company, up from 8.5% with the airline management’s concession.  Bronner said he agreed to yield back two percent of RSA’s stake to US Airways management within two years of the airline’s emergence from bankruptcy, according to Reuters.

Earlier in the week Bronner told a state pension panel that he wanted to sweeten the original deal with the airline, either by increasing the board representation, reducing the $240 million investment, receive preferred stock or find another way to improve the deal (see  Bronner Looks To Sweeten US Airways Deal .