Northwest downgraded to STRONG SELL
08-03-2005, 08:32 AM
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Northwest downgraded to STRONG SELL
bizjournals.com
S&P downgrades NWA to 'strong sell'
Wednesday August 3, 10:01 am ET
Standard & Poor's Equity Research downgraded Northwest Airlines Corp. to "strong sell" from "sell" on Tuesday, citing an "increasing possibility" the airline will file for Chapter 11 bankruptcy within the next year, according to Forbes.com.
The research firm said Eagan-based Northwest has not made progress toward cutting labor costs. The carrier has said it needs to cut at least $1.1 billion in labor costs to avert bankruptcy.
Standard & Poor's Equity Research also said Northwest's stock price does not appropriately reflect the risk of bankruptcy. The research firm reiterated its $3 target price on the stock.
Northwest (Nasdaq: NWAC - News) shares were down 17 cents, or 3.5 percent, to $4.74 in afternoon trading Tuesday.
Published August 2, 2005 by The Business Journal
S&P downgrades NWA to 'strong sell'
Wednesday August 3, 10:01 am ET
Standard & Poor's Equity Research downgraded Northwest Airlines Corp. to "strong sell" from "sell" on Tuesday, citing an "increasing possibility" the airline will file for Chapter 11 bankruptcy within the next year, according to Forbes.com.
The research firm said Eagan-based Northwest has not made progress toward cutting labor costs. The carrier has said it needs to cut at least $1.1 billion in labor costs to avert bankruptcy.
Standard & Poor's Equity Research also said Northwest's stock price does not appropriately reflect the risk of bankruptcy. The research firm reiterated its $3 target price on the stock.
Northwest (Nasdaq: NWAC - News) shares were down 17 cents, or 3.5 percent, to $4.74 in afternoon trading Tuesday.
Published August 2, 2005 by The Business Journal
08-03-2005, 02:11 PM
#2
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No telling what's going on behind the scenes, but the press isn't painting a very pretty picture are they? A few related stories on the wire.
One is about the NWA FA's requesting [to the FAA] that NWA be forced to stop training replacments as they aren't employees (yet) although NWA is sharing secuirty sensitive info. Reminds me of what Alaska Airlines did with the bagage handlers in SEA a few months ago. They had to go back and fire many of the the new hires after they failed background checks......way after being given access to the AOA.
The other story is about the NWA mechs. have left the table stating that "NWA prefers a strike....and it looks like they'll get their wish".
We can all be sure that NWA will blame labor for the companies woes in the months to come when all along they could have worked to find common ground. Instead they'll get the meltdown.
Sad days......
One is about the NWA FA's requesting [to the FAA] that NWA be forced to stop training replacments as they aren't employees (yet) although NWA is sharing secuirty sensitive info. Reminds me of what Alaska Airlines did with the bagage handlers in SEA a few months ago. They had to go back and fire many of the the new hires after they failed background checks......way after being given access to the AOA.
The other story is about the NWA mechs. have left the table stating that "NWA prefers a strike....and it looks like they'll get their wish".
We can all be sure that NWA will blame labor for the companies woes in the months to come when all along they could have worked to find common ground. Instead they'll get the meltdown.
Sad days......
08-08-2005, 09:05 AM
#3
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Joined APC: Feb 2005
Position: B777
Posts: 5,853
It sure looks like NWA is setting up for a BK filing, I hope I'm wrong. Between the selloff and the announcment that they want to use Champion to augment flights...things don't seem to be going all that well.
***************************
Insiders selling NWA stock
BUSINESS: Analysts say sales by corporate officers sound alarms for investors.
BY TERRY FIEDLER
STAR TRIBUNE
MINNEAPOLIS - Given the company's risky situation, Northwest Airlines stock isn't for widows and orphans. Apparently, it's not for some of the most savvy investors around, either.
Northwest director Gary Wilson has sold more than75 percent of his NWA holdings, 3.2 million shares, since May. Director Al Checchi has unloaded more than 85 percent of 4.6 million shares since the turn of the year.
"Look at the insider selling over the past couple of months," said Jim Corridore, Standard & Poor's airlines equity analyst. "That's very alarming."
S&P now carries a "strong sell" rating on Northwest, a rare black mark on Wall Street, where analysts more typically signal their caution about a company with labels such as "hold" or "market perform."
Those who have the gump-tion to hold onto Northwest stock while prominent insiders are bailing are essentially betting that the airline can somehow resolve its severe financial problems without filing for Chapter 11 bankruptcy.
If it can, the stock, which now trades at a little more than $4 a share, stands to have significant upside. But if Northwest files for bankruptcy, something many industry observers expect, the stockholders probably will get wiped out because they would have to stand in line behind secured and unsecured creditors and there probably won't be any money left for them.
The best-case scenario for the stockholders during a bankruptcy, veteran Minneapolis bankruptcy attorney Bill Kampf said, is getting back about 20 percent of what their stock was worth. Recent airline bankruptcies have resulted in stockholders seeing all of their equity wiped away.
Kampf said it's clear to him that Northwest will seek Chapter 11 bankruptcy reorganization.
"I put the chances of it happening at someplace between 90 and 99 percent," he said, though he didn't give a timeline.
Northwest management has said repeatedly that it would prefer to negotiate labor concessions that can alleviate some of its financial problems, rather than file for bankruptcy. In a memo to employees in June, CEO Doug Steenland wrote, "Bottom line: The significant majority of airlines that file for bankruptcy do not survive."
Like Kampf, Corridore at Standard & Poor's is taking the possibility of bankruptcy seriously. His "strong sell" rating cites the lack of progress in securing cuts from mechanics and flight attendants, a potential strike by mechanics this month, and the likelihood of "significant cash burn" in the second half of the year, which would diminish one of Northwest's biggest assets, its $2.1 billion in cash.
Combined, he said, they make for an increased possibility of bankruptcy in the next 12 months, a risk that is too high to hold the stock. Those who do should be paying even less for the shares than their current depressed level, he added.
"I'm not saying they are going to file bankrupcty, but the risks... have to be reflected in the stock," Corridore said.
Steenland has said that if the company decides to file, there is added incentive to do it before a new bankruptcy law takes effect in October. Among other things, the new law restricts the amount of time a company board has to present a reorganization plan to the court, without fear of a takeover, to no more than18 months. United, in contrast, has been in bankruptcy proceedings for nearly three years.
Douglas Baird, a University of Chicago Law School professor, said that change shouldn't be a big factor, but the timing of the new law "provides a good focal point."
"They will have seen what the summer is like and have some sense of the downturn that will come in winter," Baird said. "The law would about to take effect and that might be as good a time as any" to file.
Given the cost pressures, from increased fuel prices to Northwest's status as a high-cost carrier in the industry, something has got to give.
Not surprisingly, Northwest stock has become "a happy hunting ground for speculators," said Virginia-based airline industry analyst Darryl Jenkins.
While "this is not the type of stock you take money out of your retirement account to invest in," he said the price has fallen so low that "unless you need the liquidity, there's no reason not to stick it out."
The poster child for such a rebound is American Airlines, which avoided bankruptcy and has begun to turn small quarterly profits. Its stock, which fell below $2 in early 2003 when bankruptcy fears about that carrier hit a peak, now trades near $13.50 a share, a nearly 10-fold gain for those who got in at the bottom.
One noted hedge fund manager recently made a big bet on Northwest, possibly in the hope of realizing a similar payday down the road. Connecticut-based SAC Capital Advisors, run by Steven Cohen, bought 4.9 million shares, or 5.7 percent of Northwest's shares, the hedge fund disclosed in late July.
Among those inside Northwest who are still hanging tough is a group of pilots. The NWAC Trust for Pilots is the third-largest owner of Northwest stock, with 5.5 million shares, or 6.3 percent of the shares outstanding. The two largest owners are big institutions -- Fidelity Management, 12.9 percent, and State Street Corp., 8.8 percent.
Mark McClain, chairman of the Northwest branch of the Air Line Pilots Association, said the pilots got the stock as part of concessions made in 1993. Although the pilots association bargained the deal, the stock is held by the individual pilots who can do as they please with the stock.
McClain said the pilots association is not in the business of giving its members investment advice. He did note, though, that the pilots' overall stake has dropped over the years from more than 10 percent to the current 6.3 percent.
"I sold most of mine a while ago," McClain said. "But I'm a bit of a speculator, so I kept a little."
***************************
Insiders selling NWA stock
BUSINESS: Analysts say sales by corporate officers sound alarms for investors.
BY TERRY FIEDLER
STAR TRIBUNE
MINNEAPOLIS - Given the company's risky situation, Northwest Airlines stock isn't for widows and orphans. Apparently, it's not for some of the most savvy investors around, either.
Northwest director Gary Wilson has sold more than75 percent of his NWA holdings, 3.2 million shares, since May. Director Al Checchi has unloaded more than 85 percent of 4.6 million shares since the turn of the year.
"Look at the insider selling over the past couple of months," said Jim Corridore, Standard & Poor's airlines equity analyst. "That's very alarming."
S&P now carries a "strong sell" rating on Northwest, a rare black mark on Wall Street, where analysts more typically signal their caution about a company with labels such as "hold" or "market perform."
Those who have the gump-tion to hold onto Northwest stock while prominent insiders are bailing are essentially betting that the airline can somehow resolve its severe financial problems without filing for Chapter 11 bankruptcy.
If it can, the stock, which now trades at a little more than $4 a share, stands to have significant upside. But if Northwest files for bankruptcy, something many industry observers expect, the stockholders probably will get wiped out because they would have to stand in line behind secured and unsecured creditors and there probably won't be any money left for them.
The best-case scenario for the stockholders during a bankruptcy, veteran Minneapolis bankruptcy attorney Bill Kampf said, is getting back about 20 percent of what their stock was worth. Recent airline bankruptcies have resulted in stockholders seeing all of their equity wiped away.
Kampf said it's clear to him that Northwest will seek Chapter 11 bankruptcy reorganization.
"I put the chances of it happening at someplace between 90 and 99 percent," he said, though he didn't give a timeline.
Northwest management has said repeatedly that it would prefer to negotiate labor concessions that can alleviate some of its financial problems, rather than file for bankruptcy. In a memo to employees in June, CEO Doug Steenland wrote, "Bottom line: The significant majority of airlines that file for bankruptcy do not survive."
Like Kampf, Corridore at Standard & Poor's is taking the possibility of bankruptcy seriously. His "strong sell" rating cites the lack of progress in securing cuts from mechanics and flight attendants, a potential strike by mechanics this month, and the likelihood of "significant cash burn" in the second half of the year, which would diminish one of Northwest's biggest assets, its $2.1 billion in cash.
Combined, he said, they make for an increased possibility of bankruptcy in the next 12 months, a risk that is too high to hold the stock. Those who do should be paying even less for the shares than their current depressed level, he added.
"I'm not saying they are going to file bankrupcty, but the risks... have to be reflected in the stock," Corridore said.
Steenland has said that if the company decides to file, there is added incentive to do it before a new bankruptcy law takes effect in October. Among other things, the new law restricts the amount of time a company board has to present a reorganization plan to the court, without fear of a takeover, to no more than18 months. United, in contrast, has been in bankruptcy proceedings for nearly three years.
Douglas Baird, a University of Chicago Law School professor, said that change shouldn't be a big factor, but the timing of the new law "provides a good focal point."
"They will have seen what the summer is like and have some sense of the downturn that will come in winter," Baird said. "The law would about to take effect and that might be as good a time as any" to file.
Given the cost pressures, from increased fuel prices to Northwest's status as a high-cost carrier in the industry, something has got to give.
Not surprisingly, Northwest stock has become "a happy hunting ground for speculators," said Virginia-based airline industry analyst Darryl Jenkins.
While "this is not the type of stock you take money out of your retirement account to invest in," he said the price has fallen so low that "unless you need the liquidity, there's no reason not to stick it out."
The poster child for such a rebound is American Airlines, which avoided bankruptcy and has begun to turn small quarterly profits. Its stock, which fell below $2 in early 2003 when bankruptcy fears about that carrier hit a peak, now trades near $13.50 a share, a nearly 10-fold gain for those who got in at the bottom.
One noted hedge fund manager recently made a big bet on Northwest, possibly in the hope of realizing a similar payday down the road. Connecticut-based SAC Capital Advisors, run by Steven Cohen, bought 4.9 million shares, or 5.7 percent of Northwest's shares, the hedge fund disclosed in late July.
Among those inside Northwest who are still hanging tough is a group of pilots. The NWAC Trust for Pilots is the third-largest owner of Northwest stock, with 5.5 million shares, or 6.3 percent of the shares outstanding. The two largest owners are big institutions -- Fidelity Management, 12.9 percent, and State Street Corp., 8.8 percent.
Mark McClain, chairman of the Northwest branch of the Air Line Pilots Association, said the pilots got the stock as part of concessions made in 1993. Although the pilots association bargained the deal, the stock is held by the individual pilots who can do as they please with the stock.
McClain said the pilots association is not in the business of giving its members investment advice. He did note, though, that the pilots' overall stake has dropped over the years from more than 10 percent to the current 6.3 percent.
"I sold most of mine a while ago," McClain said. "But I'm a bit of a speculator, so I kept a little."
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