Judge approves Northwest settlement

Judge approves Northwest settlement

	Published : Wed, 16 May 2007 18:12 By : Agencies Print this Story

NEW YORK (AP) - Northwest Airlines overcame a major obstacle on its path to exiting bankruptcy Wednesday when a judge approved a settlement with a shareholder group that had opposed the carrier's reorganization.

Judge Allan Gropper approved the $5 million settlement at the start of a Northwest hearing to seek acceptance of its restructuring plan. The hearing continued.

Northwest and an ad hoc committee of equity holders, led by the Owl Creek hedge fund, agreed on Monday that the shareholder group would drop its opposition to the restructuring plan if Northwest would pay up to $5 million in fees and expenses incurred by the group.

The U.S. Trustee, the federal government's representative in bankruptcy cases, objected, arguing that the shareholder group should not be paid because it had not made a substantial contribution to aid the company's emergence from bankruptcy.

The committee had been agitating for some return on its investment. In bankruptcy cases, shareholders typically get nothing. The shareholder group's main accusation was that Northwest has been underestimating its value as a reorganized company.

Northwest expects to be worth roughly $7 billion when it emerges, plus another $750 million when it sells new shares.

Eagan, Minn.-based Northwest, the nation's fifth-largest airline, has spent more than 20 months to cut costs in its reorganization effort and said it expects to emerge from bankruptcy in June.

The settlement was reached after the committee read a confidential report by a court-appointed examiner, who was appointed at the request of the equity committee to determine whether Northwest had properly evaluated its worth.

'There's a nexis between the examiner's report and the settlement,' Judge Allan Gropper said.

Gropper said parts of the report would eventually be made public after a decision could be made over how to protect certain commercial information that was included.