AMR Facing Suit Over TWA Ticket Agreement, Icahn's Lawyer Says
Wilmington, Delaware, Jan. 11 (Bloomberg) -- Former Trans World Airlines Inc. Chairman Carl Icahn is preparing to sue AMR Corp., claiming AMR is using it planned buyout of TWA to dump an agreement that gives Icahn access to discounted airline tickets, a lawyer for Icahn said.
New York attorney Edward Weisfelner said he is preparing a contract-interference claim after learning yesterday that AMR won't pick up the tab for TWA's ticket agreement with Icahn's Karabu Corp. AMR agreed to pay $4 billion to buy TWA's assets and assume its debts as part of a bankruptcy reorganization. Weisfelner is representing Icahn in TWA's Chapter 11 case.
As part of an earlier TWA bankruptcy filing, Icahn agreed to extend the payment deadline on $197 million in loans to TWA in exchange for the right to buy more than $610 million in cut-rate TWA tickets. Icahn sells the tickets on his Lowestfare.com Web site. He stepped down as TWA chairman in 1993.
``The damages here are astronomical -- in the multi-billions of dollars,'' Weisfelner said.
AMR officials wouldn't discuss the case. ``If somebody sues us, we never comment on pending legal actions,'' said company spokeswoman Martha Pantin.
The lawsuit may be an opening jab in a legal fight between Icahn and AMR over TWA, which filed for protection from creditors in U.S. Bankruptcy Court in Wilmington, Delaware, yesterday. It is the third time in a decade that TWA has filed for Chapter 11 protection.
Under an agreement that must be approved by a judge, American would buy TWA property and pick up lease agreements on its planes. American said it would hire TWA's 20,000 workers and provide $200 million in immediate financing for the 75-year-old carrier.
At a hearing yesterday, Weisfelner asked U.S. District Judge Sue Robinson to reject AMR's bid. Icahn, the billionaire corporate raider, should be allowed to offer his own financing package, Weisfelner said.
Icahn and his allies could provide better financing terms than American, Weisfelner said, according to TWA lawyers. Robinson brushed aside Icahn's offer and let AMR's financing plan go forward, the lawyers said.
TWA officials will consider competing bids for the airline until March 1, according to court papers.
Weisfelner said Icahn is mulling whether to join with TWA's unions and plane owners to make an offer for his old airline. Icahn took over St. Louis-based TWA in 1985 and eventually led the company into a Chapter 11 filing in 1992.
``It would be his second time around,'' Weisfelner said. ``But they've modernized the fleet and we're in a different labor environment.''
Even if he doesn't make a bid, Icahn is likely to have influence over TWA's bankruptcy case. Icahn holds about $56 million in TWA bonds, Weisfelner said.
Icahn has a reputation for playing hardball once he jumps into a high-profile bankruptcy case. In 1997, he led Marvel Entertainment Group bondholders in a bid to wrest control of the world's largest comic book publisher from Ronald Perelman.
Icahn and bondholders won control of Marvel in a court fight only to have a judge take it away again by appointing a trustee to oversee the company's operation. Marvel later emerged from bankruptcy as part of Toy Biz Inc. Weisfelner represented Icahn in the Marvel case.
TWA's lawyers are preparing to counter potential objections from Icahn and other bondholders about bonuses the airline is offering executives who agree to stay with the company during the bankruptcy case.
TWA wants to create a $15 million bonus pool to give executives an incentive to stay until the sale to AMR is completed. TWA officials are hoping the transaction will close by the end of May.
AMR shares fell 25 cents to $38.44 today. The Fort Worth, Texas-based owner of American Airlines has seen its shares rise 31 percent in the past year.
Jan/11/2001 21:43 ET
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