Creditors approve US Airways reorganization plan

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Creditors approve US Airways reorganization plan

ALEXANDRIA, Va. (AP) =97 As expected, US Airways' creditors voted=20
overwhelmingly to approve the airline's reorganization plan, which=20
undergoes a final review by a bankruptcy judge on Tuesday. Also on Monday,=
=20
the federal government objected to the reorganization plan proposed by=20
bankrupt US Airways, saying it unfairly limits the legal liability of the=20
airline's legal and financial advisers. Bankruptcy experts said the dispute=
=20
is a common one that should not present a significant hurdle to the=20
airline's overall plans. The airline said Monday that all the creditor=20
classes approved the plan with a minimum support of 81 percent. Unsecured=20
creditors will receive only 1 to 2 cents on the dollar against their=20
claims. Shareholders will get nothing; they did not vote on the plan.

The objection from the U.S. Trustee's office came one day before Tuesday's=
=20
confirmation hearing, in which US Airways hopes Bankruptcy Judge Stephen=20
Mitchell will give his blessing to the airline's plan and allow it to=20
emerge from bankruptcy at the end of the month. The trustee's objection is=
=20
one among more than a dozen filed by various parties, including the=20
airline's pilots' union, which has objected to efforts to terminate its=20
pension plan. Dennis Early, a lawyer with the trustee's office, declined to=
=20
comment on the filing. In the 12-page motion, the trustees say the airline=
=20
improperly seeks to limit the liability of its lawyers, financial advisers,=
=20
creditors' committee and other groups to instances of willful misconduct.=20
"Standards of professionalism dictate that attorneys not shield themselves=
=20
from liability potentially resulting from carrying out fiduciary duties on=
=20
behalf of clients," Early wrote in the brief.

US Airways spokesman David Castelveter said the airline is working to=20
resolve objections filed by the trustee's office and other groups. "But if=
=20
not, we believe we will prevail in court," Castelveter said. Evelyn Biery,=
=20
who heads the bankruptcy practice for the Houston-based law firm Fulbright=
=20
and Jaworsky, said it is common for the trustee and a bankrupt company to=20
differ on the issue of legal liability because bankruptcy law does not=20
spell out a specific legal standard. "The bankruptcy professionals of all=20
kinds will all try to get as much immunity from their own negligence as=20
they can," she said. "The U.S. Trustee always takes a firm position against=
=20
that." Perhaps the most serious objection to the airline's reorganization=20
plan comes from the Air Line Pilots Association. The airline wants to=20
terminate the existing plan and hand it over the federal Pension Benefits=20
Guaranty Corporation. They would replace the old plan with a new, smaller=20
plan that would save the company about $800 million over the next seven=20
years. The pilots, many of whom could see their benefits cut in half, are=20
fighting the airline. But over the weekend the union's actuaries concluded=
=20
that US Airways' financial projections about the need to terminate the plan=
=20
are accurate. The union and airline still differ, though, on specific=20
issues related to the pension. Negotiations are ongoing.


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