Icahn Slams Kerkorian’s Efforts to Acquire TWA

CHICAGO —  Carl C. Icahn, chairman of Trans World Airlines Inc., said Monday that investor Kirk Kerkorian was trying to be “a spoiler” through his efforts to buy the ailing carrier.

Kerkorian, a billionaire who owns the luxury MGM Grand airline, reached a tentative agreement Friday with TWA’s major unions to buy the company.

But Icahn, in an interview with Reuters, said that Kerkorian’s eleventh-hour bid is an attempt to force TWA into a position where the investor can buy it for nothing.

“I think Kerkorian is trying to maneuver the whole airline where it’s in such bad shape (that) we’re just going to give it to him,” Icahn said. “And that’s just not going to happen. Kerkorian’s play here is to be a spoiler.”

Underscoring TWA’s weak financial footing, the carrier Monday reported a net loss last year of $237.6 million, compared to a loss of $298.5 million in 1989.

In the fourth quarter, TWA lost $183.3 million, compared to a $181.2-million loss in the year-ago quarter.

TWA said its working capital at year’s end was a negative $353.4 million, compared to negative $55.5 million a year earlier.

Kerkorian’s pact with TWA’s major unions hinges on the airline keeping key London routes that the carrier has agreed to sell to competitor American Airlines for $445 million.

Kerkorian’s investment company, Tracinda Corp., is waiting for a final decision on the route sale from the Department of Transportation before deciding whether to bid for the airline, a negotiator said.

The agency has tentatively rejected the sale of three of the routes, and a final ruling is expected this week.

Not only does the Kerkorian deal hinge on keeping the routes, but he must restructure TWA’s roughly $2.7 billion in debt and agree with the unions on new contracts.

Icahn also said Kerkorian’s tactics of negotiating with bondholders over TWA’s debt could be “extremely dangerous.”

“If we continue along this path, there might not be an operating airline by the time they’re through negotiating with the bondholders,” Icahn said. “We’re losing a lot of money.”

In reporting its earnings, the carrier said the impact of the Gulf crisis on the travel industry, sharp rises in fuel prices and the recession all took their toll on its balance sheet.

In early February, TWA defaulted on $75 million in debt payments.

“I don’t think it’s any secret to anyone that TWA is a mismanaged company,” said Alex Yemenidjian, Kerkorian’s negotiator.

The TWA chairman declined to comment on whether he would accept a Kerkorian bid, saying: “I think it’s ridiculous to speculate.

“I just really don’t think there is an offer,” he said. “We’ve got enough disruptions. It’s a headache.”

Icahn, who took TWA private in 1988, said he had not been contacted by Kerkorian.

Icahn added that if Kerkorian wanted TWA with the London routes, he should have acted before TWA struck a deal to sell them.

Kerkorian’s negotiator also said talk of putting TWA into a prepackaged bankruptcy filing as a condition for the purchase was “mere speculation.”

Under terms of his deal with TWA’s three key unions, Kerkorian would inject $250 million in cash and own two-thirds of the airline.

The unions agreed to $137 million in concessions and would own one-third of the carrier.

Eventually, there would be a debt-for-equity swap under which the bondholders would get stock and the relative stakes of Kerkorian and the unions would be diluted.