COURT APPROVES CHAPTER 11 PLAN FOR EASTERN AIR LINES; CREDITORS NET
HIGHER INDUSTRY RETURN
MIAMI, December 22, 1994 -- A New York Court today approved a
Chapter 11 plan for Eastern Air Lines, paving the way for the
industry's most comprehensive cash settlement in recent history. Under
the plan, the overwhelming majority of Eastern's general unsecured
creditors (over 70,000) will receive an 11 cent per dollar cash
distribution during the first quarter of 1995.
"In working to meet our obligations to Eastern's creditors, we are
pleased that the cash recovery we have been able to realize represents
a high water mark in this industry," said Eastern Trustee, Martin R.
Shugrue, Jr. "This cash recovery exceeds the combined recoveries to
date for the unsecured creditors in the recent Continental, TWA, Pan
Am and Midway airline bankruptcies."
The general unsecured creditors with claims of $100,000 or less,
include all ticketholders, all employees and most vendors.
Approximately 150 general unsecured creditors, with claims in excess
of $100,000, will receive distributions over a period of approximately
12 to 18 months as remaining assets are disposed of, with an aggregate
range of distributions of 9 cents to 16 cents per dollar. The plan
also provides for full payment of secured claims as well as remaining
creditors with administrative claims, priority tax claims, priority
employment claims and priority consumer claims. These payments are in
addition to the $1 billion already paid to Eastern's retirees,
employees and secured creditors.
Industry observers attribute the success of the plan to the controlled
liquidation managed by the Trustee in collaboration with the
Creditor's Committee, under the close supervision of Chief Bankruptcy
Judge Burton R. Lifland, which resulted in greater returns to the
creditors, rather than taking a more typical "fire sale" approach.
The rate of return to Eastern creditors is attributed to the Trustee's
success in selling Eastern assets at prices in excess of those
anticipated; successful litigation and negotiation of non-meritorious
claims; and efficient management of personnel and facilities after the
airline shut down. The Trustee was successful in selling assets during
an uncertain time for the airline industry that added approximately $1
billion in value to Eastern's estate. Sales included aircraft,
refurbished engines and an auction of "perishable" assets, such as
slots, gates and routes -- whose value the Trustee protected by
The plan provides for the creation of an entity to conclude the
liquidation of the remaining assets.
/CONTACT: Martin R. Shugrue Jr., 305-873-2625, or John J. Sicilian,
305-873-3455, both of Eastern Air Lines; or Joel B. Zweibel, Esq.,
Counsel to the Creditors Committee, 212-326-2140/