Responding swiftly to objections of Northwest Airlines Corp.’s strategy for exiting bankruptcy, a creditors’ group has thrown its weight behind the plan, saying the carrier is poised to emerge a healthy and viable company, Bankruptcy Law360 reported yesterday.The unsecured creditors’ committee insisted that the airline’s controversial management equity plan (MEP), which has raised a storm with Northwest’s union workers, was both reasonable and “necessary to ensure the retention of the debtors’ talented management team.” Northwest filed its disclosure statement on Feb. 15, estimating the airline’s post-bankruptcy value at $6.45 to $7.55 billion and promising its unsecured creditors up to 83 percent of their claims before allocation of stock options under the MEP. The MEP sets aside 7.7 percent of the reorganized debtors’ equity for distribution to 5,200 employees in the form of 8 million shares of restricted stock units and another 5.5 million in stock options to Northwest directors, managing directors and officers. Under the plan, a further 1.6 million shares would be granted to top employees below the director level and 6 million shares would be kept in reserve for future employees. Opponents of the MEP, which include the airline’s unionized workers, claim the equity awards are excessive and that the plan breaches the Bankruptcy Code.
Chapter 7 Bankruptcy