As Expected, TWA Files for Bankruptcy Again

Trans World Airlines Inc., as expected, entered U.S. Bankruptcy Court on Friday for the second time in 3 1/2 years, this time to complete a “prepackaged” restructuring plan that will scale back its $1.7-billion debt.

The filing was made in St. Louis, home city of the nation’s seventh-largest airline, which hopes this stay under Chapter 11 of the bankruptcy laws will be completed by Sept. 1.

TWA also said the filing is not expected to cause problems for its operations, passengers or suppliers.

“This is a good day for TWA” because the plan “significantly improves our financial strength,” Chief Executive Jeffrey H. Erickson said in a statement.

Normally, a company seeks Chapter 11 protection to keep its creditors at bay while the company, under court supervision, designs a plan to restructure its debts.

In TWA’s case, though, it has already developed a prepackaged plan approved by its creditors and public note holders, and they are using the court to get legal approval for the proposal and thus avoid any drawn-out haggling over its terms.

The plan calls for TWA’s creditors to forgive about $500 million of debt in exchange for getting more TWA common stock, lifting their combined equity stake in TWA to about 70% from 55%. TWA’s employees, who own most of the remaining shares, would see their stake drop to about 30%.

As its name implies, TWA was once a dominant force in international air travel, but the carrier fell on hard times in recent years because of its high operating costs, a takeover fight, relentless fare wars and its huge debt.

TWA first filed for bankruptcy protection in January, 1992, and emerged from it 21 months later.