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Local Help Boosts Airline Out of Bankruptcy

Hawaiian Airlines emerged from Chapter 11 bankruptcy protection June 2, thanks in part to the funding provided by Carmel Valley-based Ranch Capital LLC, and an entity it controls, RC Aviation, which now owns 53 percent of the airline.

The restructuring process at the airline, the Aloha State’s largest, took two years to complete due to a variety of complex issues associated with the case.

“There were some very complicated issues to deal with , claims that needed to be sorted out, claims that needed to be negotiated, and employee contracts that needed to be renegotiated,” said Randall Jenson, CFO for Hawaiian Holdings Inc.

Jenson and his partner, Lawrence Hershfield, through their firm, Ranch Capital and an affiliate entity, RC Aviation, acquired 10 million shares of Hawaiian Airlines last year, investing some $41.6 million into the airline. That resulted in Ranch owning 34 percent, or the controlling interest in the airline.

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RC Aviation has since acquired additional stock in the airlines, and now holds about 53 percent, Jenson said.

The reorganization plan approved by a federal bankruptcy court in Hawaii in March and developed partly by Ranch Capital was able to repay all unsecured creditors in full, and allows all shareholders to keep their stock.

In most corporate bankruptcies, unsecured creditors are lucky to collect a fraction of what they are owed, and shareholders are usually wiped out.

“I wish I could take credit for it but I can’t,” Jenson said. “This was one case that had a lot going for it. There are a lot of wounded carriers out there.”

In tandem with the airline’s emerging from Chapter 11, Hawaiian Holdings Inc. announced it was issuing $60 million in subordinated convertible notes to aid in the financing. Hawaiian Holdings also arranged a $50 million loan package from Wells Fargo Foothill, and a $25 million term loan from another, unidentified lender.

Hawaiian Airlines has been mostly profitable on an operating basis since it went into Chapter 11. For 2004, it reported an operating profit of $71 million on $764 million in revenues, compared to an operating profit of $77 million on revenues of $698 million in the prior year.

For the month of April, the airline said it had net income of $415,000 on revenues of $64 million.

Hawaiian Airlines has about 3,200 employees, and operates 25 planes over primarily Western airports, including service to Lindbergh Field in San Diego.

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