Northwest Airlines said Thursday it has wrapped up a deal to buy bankrupt regional feeder Mesaba, although it wasn't clear whether Mesaba's parent company was going to accept it.
"An agreement has been negotiated by representatives of Northwest Airlines, Mesaba Airlines, and its unsecured creditor committee. There are no significant open issues requiring further negotiations," Northwest Airlines Corp. spokesman Bill Mellon said on Thursday, reading from a letter the airline filed in Mesaba Aviation Inc.'s bankruptcy case.
The negotiations between the two bankrupt airlines appeared to bypass Mesaba's sole shareholder, MAIR Holdings Inc. The deal calls for MAIR to get a $145 million claim in Mesaba's bankruptcy, although it's not clear how much that claim would ultimately be worth. It also includes $10 million in cash for Mesaba to use as operating money, said Tim Robinson, an attorney for Mesaba's creditors.
Both carriers are in bankruptcy and Mesaba needs exit financing. Bankruptcy judges in both cases would need to approve the deal.
Mesaba currently has until February to propose its own reorganization plan. But the deal with Northwest calls for Mesaba to file a reorganization plan by Jan. 15, Robinson said. In court papers, Mesaba creditors asked that they be allowed to file their own reorganization plan by that date if Mesaba doesn't, Robinson said. Northwest's own reorganization plan is due the next day, and Mellon said Northwest plans to file its plan by then.
Robinson said that while creditors hope MAIR will go along with the sale, "we cannot afford any delay whatsoever given the time constraints of the Northwest deal."
Mesaba spokeswoman Jane Berg confirmed the filings, which were not immediately available online. She and MAIR spokesman Jon Austin had no immediate comment on the filing.
Northwest owns about 28% of MAIR, but some other MAIR shareholders aren't happy with the price.
Last week, MAIR shareholder Riley Investment Management called the $145 million claim "grossly inadequate" and said MAIR is overly influenced by Northwest.
A letter Riley sent to MAIR and filed with regulators said it wants to be involved in negotiations and to fill the three open seats on MAIR's board. It said it might intervene in the bankruptcy cases if it doesn't get its way.
John Ahn, a principal at Riley, said on Thursday he has gotten no response from MAIR. He said he had asked the company for a response by the end of this week.
A Mesaba sale would leave MAIR with only Big Sky Airlines, a small regional carrier based in Billings, Mont., and however much cash the $145 million bankruptcy claim turns out to be worth.
"We want to have direct input in terms of how that money is spent, whether it's pursuing acquisitions or distributing it back to shareholders," Ahn said. "So we're open-minded, but we want to have input, too."
Robinson said Riley has no standing to get involved in either bankruptcy case.
"They are a stranger to the process, and the fact that they are a shareholder of a shareholder of the debtor gives them no standing in the Mesaba bankruptcy," Robinson said.