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Pension Fund Bids for U.S. Airways Stake

September 19, 2002

 

Alabama's public pension fund on Thursday said it made a rival bid for a stake in bankrupt US Airways Group Inc. , topping an offer from a private-equity firm and indicating it could go higher.

The Retirement Systems of Alabama offered $240 million for a 37.5 percent stake in the airline, according to David Bronner, chief executive officer of the pension system.

The Alabama retirement system said it would not take any transaction fees in the deal and Bronner told Reuters he would consider raising his offer if Texas Pacific Group boosted its bid.

Texas Pacific previously offered $200 million for the stake in US Airways. The firm declined to comment on the offer.

"They made a low-ball offer with no competition," Bronner said about the Texas Pacific bid.

The Retirement Systems of Alabama, with about $25 billion in assets under management, plans to file documents with the U.S. Bankruptcy Court for the Eastern District of Virginia on Thursday. Bronner made the offer known in a letter to US Airways Chief Executive Officer David Siegel.

The court was due to review the status of Texas Pacific's offer at a Sept. 26 hearing, when it was also expected to consider giving the carrier access to up to $175 million, the next tranche of an emergency financing plan.

The investment, whether by the Alabama pension fund or Texas Pacific, would be made after US Airways emerges from Chapter 11.

The Retirement Systems of Alabama has a history with US Airways, the nation's sixth-largest airline. Alabama's pension fund made its first investment in US Airways debt 10 years ago.

"Today, that investment has grown to over $340 million and we believe we have both an in-depth understanding of your business as well as tremendous faith in its future," Bronner stated in his letter to US Airways' CEO.

Bronner said he decided to make a move for US Airways after not finding an attractive investment opportunity in either the stock or bond markets. He also noted current weakness in the commercial air industry presented an opportune time to pick up pieces of the carriers.

"That's when you buy things -- when other people don't want them," he said.

US Airways sought bankruptcy protection in August after failing to win concessions from all of its unions, vendors and creditors to restructure its operations without seeking Chapter 11. It was the first major domestic carrier to seek bankruptcy protection since the Sept. 11 attacks triggered a financial crisis in an industry already hit with recession.

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