Trvlr From United States of America, joined Feb 2000, 4430 posts, RR: 19 Posted (14 years 10 months 2 days 15 hours ago) and read 2446 times:
TWA Seeks To End Discount Ticket Pact With Icahn Co.
Updated 1:47 PM ET January 29, 2001
WASHINGTON (Dow Jones)--Trans World Airlines Inc. (TWA) is seeking court authority to reject its discount ticket arrangement with an entity led by financier Carl Icahn, characterizing certain anti-termination provisions within the agreement as "unenforceable."
The request, filed late Friday with the U.S. Bankruptcy Court in Wilmington, Del., brings to center stage an issue that has likely been one of the primary reasons behind Icahn's adamant opposition of AMR Corp.'s (AMR) American Airlines' bid to buy substantially all TWA's assets.
The 1993 discount ticket contract between TWA and Icahn's Karabu Corp. allows Karabu designee Lowestfare.com to purchase tickets from TWA at about 55% of the published fare. Lowestfare can then turn around and resell the tickets for its own profit, subject to certain conditions.
The American Airlines purchase arrangement, however, requires TWA to terminate, or "reject," the discount ticket deal.
Section 365 of the Bankruptcy Code generally allows a bankrupt party in its business judgment to opt whether to keep (assume) or reject current leases and contracts. The provision allows troubled entities to keep favorable arrangements while ridding itself of arrangements it determines to be unfavorable.
Icahn, in an apparent effort to avoid having the contract rejected in a bankruptcy filing, added certain provisions to the discount ticket contract that required TWA to assume, and not reject, the contract in the event it files for bankruptcy.
Counsel for Icahn couldn't be immediately reached for comment. Icahn hasn't yet filed a response to the rejection request.
In 1985, Icahn acquired a majority of TWA and three years later took the company private. In 1992, he ceded majority ownership of the airline to the company's creditors as part of a Chapter 11 reorganization. Although the company emerged from the filing in 1993, it again filed for Chapter 11 two years later in 1995.
TWA filed for Chapter 11 again on Jan. 10 in order to implement the sale of substantially all its assets to American Airlines.
Entities controlled by Icahn, including Karabu, High River Limited Partnership and Lowestfare have opposed the sale and related requests.
On Saturday, the U.S. District Court in Wilmington, Del., approved the bidding procedures, overruling objections by Icahn and others.
TWAneedsNOhelp From , joined Dec 1969, posts, RR:
Reply 4, posted (14 years 10 months 2 days 14 hours ago) and read 2346 times:
I wouldn't wish for his death....(little immature), but it should be interesting to see what happens legally here. Ichan has provisions in the Karabu contract that protect it from Bankruptcy, yet bankruptcy is designed to assist struggling carriers from relieving crushing debt load and obligations. Whats the precedent here?
Ichan sure is one smart ass, he engineered a hell of a deal for himself, one tough guy.
Raddog2 From , joined Dec 1969, posts, RR:
Reply 7, posted (14 years 10 months 2 days 13 hours ago) and read 2317 times:
It doesn't seem like the Karabu contract is enforceable if TWA is completely eaten up by AMR. What flights would be applicable under Karabu? Any flight connecting via STL? AMR could just say that these are new AA flights routed through St. Louis, not holdovers from TWA and therefore not subject to Karabu. The contract provisions specify TWA tickets. If there's no TWA -- where are the tickets? I think Icahn has no case.
AA737-823 From United States of America, joined Mar 2000, 6215 posts, RR: 10
Reply 9, posted (14 years 10 months 2 days 12 hours ago) and read 2295 times:
I agree with Corey- life is far more painful than death. Except for Ichann. Believeing in going to one of two places, I am sure that his death will be far more painful than that of many others. I can't comment on his religious beliefs, but actions betray thoughts.
Carl Ichann and Frank Lorenzo belong in the same solitary confinement cell- alone together. I have some other comments on what I would hope to happen to them in a jail setting, but this is a public board. And I don't believe in wasting soap.
Anyone who would do that to a business AND have a negative affect on the economy by limiting competition is clearly only in it for profit. Fortunately, a business run that way doesn't make a profit. Well I say fortunately, but I guess it isn't fortunate to loyal TWA or Eastern fans.
B747-437B From , joined Dec 1969, posts, RR:
Reply 14, posted (14 years 10 months 2 days 8 hours ago) and read 2248 times:
When Karabu was signed, it was a legal agreement that was binding on both parties. TWA was under duress at the time, but could always have opted for chapter 7 in lieu of accepting the agreement. However, they chose to make a deal with the devil and have paid the price for it.
Karabu is not going to just go away whether AMR wants it to or not. The only way Karabu will go away is if AMR buys out Icahn with a sweetheart deal - but they will not commit to that until they are sure of a purchase price for TWA.
Don Carty is a smart man, but Carl Icahn is smarter and more experienced. Never underestimate the snake.
TWFirst From Vatican City, joined Apr 2000, 6346 posts, RR: 51
Reply 15, posted (14 years 10 months 2 days 7 hours ago) and read 2242 times:
I disagree. Look at it this way: TWA's assets are being bought out of bankruptcy court in an auction process. American is currently the only bidder. The possibility exists that a higher bidder will enter the picture (the auction will be held in March). Let's say American didn't agree to acquire substantially all of TWA's assets and and airline's assets were bought by several airlines out of auction. Then what would happen to the Karabu contract? TWA as an incorporated entity is dead (or will be at some point in this process). Thus, contracts with this former incorporated entity also die. The contract was written so that TWA couldn't declare bankruptcy just so that it could reorganize itself to void the contract and emerge as an independent airline as it was before it entered such a bankruptcy. Also, the contract was written to survive if the company was bought or merged through a stock transaction. But the current scenario is different, and thus Karabu goes bye bye.
B747-437B From , joined Dec 1969, posts, RR:
Reply 16, posted (14 years 10 months 2 days 7 hours ago) and read 2238 times:
You raise good points TWFirst. However, the TWA deal is not a straightforward chapter 11 but rather one under section 363. There are petitions pending before the court by multiple parties to change this to a straightforward chapter 11. While I am not familiar enough with bankruptcy code to comment on the intricacies, it is my understanding that a straightforward chapter 11 reorganization would include Karabu as an outstanding liability that is correspondingly linked to certain assets. I am not certain of the specifics, but this is the opinion of persons who are, that Karabu would be saddled (or at least Icahn will petition for it to be saddled) upon the party that acquires those assets. It will be a long drawn out legal battle, and Icahn's lawyers have proven their ability to pull magic out of thin air before!