Trans World Airline's bankruptcy filing Wednesday seemed to leave First Security Bank, TWA's largest creditor, holding the bag for $150 million.
But it is individuals and other third-party organizations whose investments are in peril, not the bank's, according to a First Security spokeswoman.
"We're just the trustee for those who bought TWA notes, so First Security itself really doesn't have any exposure" to possible losses stemming from the bankruptcy, said First Security spokeswoman Rita Esposito.
TWA, the nation's longest existing commercial air carrier, filed for Chapter 11 bankruptcy protection in Wilmington, Del., Wednesday, shortly after its board of directors approved a $500 million acquisition of the troubled airline by AMR Corp., parent company of American Airlines.
The filing was part of a complex deal that, if it goes through, will leave American and United Airlines with 50 percent of the U.S. air travel market — and Delta Air Lines, which operates a hub-and-spoke operation out of Salt Lake International Airport, a distant third among the "big three" carriers. TWA blames the same increase in oil prices that plagued motorists at the gas pumps last year for pushing it over the edge into bankruptcy. The carrier said the increase in jet fuel prices, pushed up by rising crude oil costs that rose to more than $30 per barrel last year, added more than $50 million to the company's costs in 1999 and some $250 million in 2000.
Although a competing bid for the airline's assets may yet be forthcoming, the Associated Press says analysts believe that's unlikely.
"I think a lot of investors have looked at (TWA) over the past years and walked away from the table," the AP quoted Robert Milmore, an analyst at the New York firm Arnhold & S. Bleichroeder.
First Security's investors, for whom it operates a trust that owns some $150 million of TWA's debt, likely now wish they too had "walked away" from that investment.
First Security's Esposito did not say who the organizations and individuals are in the trust but said the bank would "act according to documentation and serve the underlying note holders the best way we can." She reiterated that in the case of TWA's debt, the bank is not liable for any potential losses stemming from the bankruptcy.
"We are the manager of the trust. It's not a credit relationship but a trustee relationship."
San Francisco-based Wells Fargo, which is currently assimilating First Security Corp. into its organization after acquiring FSCO in October, did not return calls seeking comment by press deadlines Thursday.
Although it had said otherwise prior to the buyout bid by AMR — the deal must be approved by the bankruptcy court, which could choose to auction off TWA's assets rather than sell them to AMR — TWA admitted Wednesday it would not be able to make a payment on $100 million of its outstanding credit that is due next week.
AMR chairman and CEO Donald Carty told the AP Wednesday that some entity might try to outbid his company for TWA but noted that AMR has a $75 million breakup fee built into its offer along with the right to make a counter offer if any competitive bids are forthcoming.
E-mail: max@desnews.com