NEW YORK, Jan 11 (Reuters) - Carl Icahn is spoiling for a fight and stands to disrupt American Airlines' plan to buy the assets of Trans World Airlines Inc. with the approval of TWA's bankruptcy court.
The former TWA chairman and corporate raider said he holds $48 million in secured debt and $15 million in unsecured debt of TWA, in addition to an agreement under which the No. 8 U.S. airline must sell him discounted tickets, which he has been reselling through his Lowestfare.com Web site.
"I think he'll be successful in making a hunk of money out of the deal, but exactly how I'm not sure," said Barbara Beyer, president of aviation consulting firm Avmark Inc.
AMR Corp. , American's parent, on Wednesday unveiled its plans to buy TWA's assets for $500 million in cash and the assumption of $3 billion in aircraft leases. Icahn lawyer Ed Weisfelner argued later on Wednesday that TWA failed to adequately consider alternatives to bankruptcy.
Weisfelner said the St. Louis-based airline had received recapitalization proposals last year from Boeing Co., GE Capital Corp. and groups representing TWA workers.
A TWA spokesman declined to comment on any proposals it might have previously received. "TWA was actively searching for a long period of time, at least a year, for solutions to our financial problems," spokesman Mark Abels said. The American proposal was "the best that we were offered."
The federal judge rejected Icahn's bid to replace American's debtor-in-possession financing of TWA with his own, saying that although Icahn's fee was lower, there was no compelling difference between the two, considering the roughly $4 billion value of the TWA deal, including debt.
"The employees and current management (of TWA) aren't very fond of him so basically there are an awful lot of people who would prefer that he not be in the middle of the deal," Beyer said.
Icahn acquired control of TWA in 1985, and took the company private three years later. He resigned as chairman in 1993, a year after a previous bankruptcy filing. He entered the cheap tickets deal with TWA by foregoing a loan owed him.
American said it does not plan to honor the agreement, which it says can be voided under bankruptcy law.
A typical tactical approach by TWA creditors such as Icahn could be to try to slow down the process and squeeze more money from American, an attorney with an extensive bankruptcy practice told Reuters. In addition, his ticket agreement expires in 2003, and he could seek compensation for the lost profits if the agreement is terminated.
"He comes in and starts slinging things around," the bankruptcy lawyer, who asked not to be quoted by name, said of Icahn. "That's what he did in TWA's last bankruptcies, and that's what he did in Marvel's," referring to comic-book company Marvel Entertainment.
Besides the Icahn threat, some analysts think Delta Air Lines Inc. could step into the mix. Delta is currently the world's No. 3 airline after United and American, and risks being left behind as its bigger rivals grow, leaving it with more limited consolidation options.
"I would not be surprised if Delta dips at least a toe in the water. I'm sure Delta is looking at it very closely," said airline analyst Brian Harris, of Salomon Smith Barney. "Delta cannot afford to sit back and see the industry consolidate upon the terms agreed upon by American and United."
Of the major hub-and-spoke airlines, Harris noted American and Delta have the two strongest balance sheets.
A Delta spokesman declined to comment. ((Simon Hirschfeld, New York newsroom, 212-859-1974, firstname.lastname@example.org))
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