Bank Eases Debt Terms for Hawaiian Airlines’ Parent

HAL Inc., the ailing parent of Hawaiian Airlines, won some breathing room Thursday when its lender agreed to swap $50 million in debt for preferred stock.

HAL, acquired last year in a buyout led by Newport Beach entrepreneur Peter V. Ueberroth, said that the swap was part of an overall restructuring of a $125-million loan from Security Pacific Bank.

The bank, which was due a $20-million payment Thursday, also agreed to significantly reduce its HAL stock warrants, shrinking its potential stake in HAL’s common shares to 8% from 42%.

Some observers say the deal suggests that Security Pacific had little hope of being repaid any time soon. HAL took on the debt to finance the buyout of the airline by Ueberroth, former Olympic organizer, and his associates, including Newport Beach attorney Thomas Talbot. The loan has been in default on and off since last June.

Though losing money when it was acquired, HAL’s condition worsened after the Ueberroth-led buyout. The airline faced staggering acquisition-related debt payments at a time when competition in Hawaii intensified and jet fuel prices soared.

Last month, the airline agreed to sell for $13 million its prized Australian route and a 25% stake to NWA Inc., the parent of Northwest Airlines. The route sale hasn’t yet received government approval. NWA also agreed to lend HAL $7 million.

In a statement, HAL Chief Executive Talbot said the airline faced “formidable challenges” but that “support from shareholders and lenders . . . gives Hawaiian the chance to become one of the most competitive airlines in the industry.” HAL is based in Honolulu and flies mostly among the Hawaiian Islands. It also has routes from Hawaii to the West Coast and to Japan. Its shares closed at $7.75, down 37 1/2 cents.