Snag Resolved in Northwest Debt Payments
MINNEAPOLIS (AP) _ Northwest Airlines has cleared another hurdle on the road toward rescheduling $1.5 billion in debt payments.
A disagreement between Northwest’s banks and one of its suppliers, Airbus Industrie, had jeopardized the payment rescheduling and threatened to unravel a labor agreement between Northwest and its unions.
But Airbus spokeswoman Sandy Smith said Wednesday the dispute was resolved late Tuesday. ″All of it’s positive, very good news for Northwest ... for everyone,″ she said.
Northwest wants to reschedule its payments because it has said it cannot afford to pay about $1.5 billion due to its lenders in 1994. The plan would postpone that debt to 1997.
Northwest spokesman Jon Austin said the airline is in the process of finalizing all agreements.
″They’ve gotten over the immediate crisis, yes, but Northwest remains a highly leveraged airline,″ said Phil Brannon, a bond market analyst who follows Northwest for Mabon Securities. ″No one that I know has any good idea on how Northwest will be able to address its debt maturities in 1997.″
Airbus’ Smith declined to elaborate on the agreement. Brannon said what was at issue was collateral for an Airbus loan.
Airbus, which supplies Northwest with airplanes, was one of five lenders to give the airline a $250 million emergency loan last December.
Most of Northwest’s assets serve as collateral for bank loans. Airbus wanted some collateral to cover its own loan, as protection against a potential Northwest bankruptcy filing, Brannon said.
He said that except for Airbus, the banks involved already had agreed to reschedule payments if unions agreed to wage and benefits concessions. In turn, concessions were contingent on refinancing.
Northwest and its largest union, the International Association of Machinists, signed the concessions-for-equity agreement Wednesday. The Machinists union overwhelmingly ratified the agreement last week, with 81 percent of the 24,000 members voting for it.
″We did what had to be done to keep this airline flying,″ Machinists local president Tom Pedersen said Wednesday in a statement read at the signing. ″Now it’s Northwest’s turn.″
Northwest president and chief executive officer John Dasburg said in a statement that the union agreement marks the beginning of a ″unique labor- management partnership.″
″I strongly believe that with the continued commitment and hard work of the people of Northwest, we will be successful and return our company to profitability,″ Dasburg said.