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U.S. Bankruptcy Judge Peter Walsh approved AMR Corp.’s $742 million offer for Trans World Airlines Inc. on Monday, saying that doing otherwise would jeopardize TWA’s value to creditors. Walsh also terminated a ticket-purchase agreement that TWA has said was one of the main factors that pushed it into bankruptcy. Walsh ruled Monday that TWA Acquisition Group, an investment company backed by former TWA owner Carl Icahn, had flouted the rules laid down in January for bids on the bankrupt St. Louis-based airline. TWA Acquisition last week offered $1.1 billion for TWA, but Walsh repeatedly refused to consider the bid over a two-day hearing last weekend. The ruling arrives just before a critical deadline for TWA. The company had to pay aircraft leasing companies $92 million by the close of business Monday or risk losing its fleet of about 200 aircraft. TWA has only about $30 million in cash, officials testified, and the airline has asked AMR for about $130 million in emergency financing. Icahn’s group had said it would give TWA $350 million immediately to cover the lease payments and to replace $200 million in financing that AMR gave TWA soon after it filed for bankruptcy Jan. 10. But denying AMR’s bid for TWA would likely send the company into a “free fall,” Walsh ruled. In a decision read in court Monday, Walsh said that, given TWA’s history and tenuous financial position, denying the sale would trigger an “immediate and precipitous decline in the affairs of the debtor, with a very, very high probability — if not certainty — of a liquidation,” according to a Reuters report. Walsh also ruled AMR does not have to honor an agreement that lets Icahn purchase more than $610 million in TWA tickets at discounts of 45 percent or more. Icahn resells those tickets through an online travel agency, and TWA officials said it would be “suicidal” for any carrier to inherit the arrangement because of the way it has hindered the airline’s ability to offer discounts. Icahn is likely to appeal Walsh’s ruling, TWA officials acknowledged in a press conference with reporters Monday. “There’s no merit to these objections,” said William Compton, TWA’s chief executive, alluding to a prospective appeal by TWA Acquisition. Ed Weisfelner, the attorney at Berlack, Israels & Liberman LLP who represents Icahn, did not return calls seeking comment. Before it can take possession of TWA, AMR must clear the deal with antitrust regulators at the U.S. Department of Justice. In February, Justice officials asked AMR, the Fort Worth, Texas-based parent of American Airlines, for more information about the transaction, and final approval is not expected until April at the earliest. Antitrust investigators are focusing on whether TWA is truly a “failing firm,” Compton said. That would exempt the deal from a rigorous competition review. In principle, AMR should have little trouble showing regulators that TWA has failed. But the Dallas airline’s attorneys will have to persuade regulators that TWA’s assets would have gone out of service had it not been sold to AMR. That could prove difficult, as at least two other airlines — Continental Airlines Inc. and Northwest Airlines Corp. — have expressed interest in buying some of TWA’s assets. Three private investment groups also have told the court they are willing to buy the whole airline. AMR’s offer would pay off almost all of TWA’s secured debts, priority claims and debts accrued since it filed for bankruptcy. But unsecured creditors are not expected to collect any money. They favor Icahn’s offer because it would give them stock in a reorganized TWA, and the group said Monday they would appeal Walsh’s decision. Their opposition to the bid means there is still a chance that TWA Acquisition could get the airline, said Brian Freeman, the group’s chairman. “We’re not abandoning it,” he said. “We’re going to continue refining it, and we’re going to make it available in the event creditors prevail or the deal is rejected by Justice.” Another hurdle for AMR will be winning the support of TWA’s unions. AMR has announced plans to fold TWA’s St. Louis hub into its own route structure, meaning it will not have to lay off many of the airline’s 20,000 employees. That promise won over the Air Line Pilots Association, which testified in court that its members blame Icahn, who once owned TWA, for bankrupting the airline. But AMR still has to convince the International Association of Machinists and Aerospace Workers, which represents 16,000 TWA workers. The IAM is worried that its members will lose some of their benefits and compensation rights during a transition period in which TWA will continue to operate as a subsidiary of AMR. The machinists union doesn’t support Icahn either, but the group had wanted to resolve differences with AMR before its offer was approved. Nonetheless, an IAM spokesman said Monday that the group was pleased with Walsh’s decision. “Based on the testimony in court, any postponement of the deal would have meant liquidation for TWA,” said IAM spokesman Joseph Tiberi. “That’s not in the best interest of anyone.” Copyright (c)2001 TDD, LLC. All rights reserved.

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