Bankruptcy for Atlas

Bankruptcy for Atlas

Copyright 2003, Traffic World, Inc.

Atlas Air Worldwide Holdings plans to file for Chapter 11 bankruptcy protection in the first half of December. The Purchase, N.Y.-based company has pre-negotiated a filing in an effort to quickly restructure and emerge from bankruptcy.

Atlas plans to secure agreements with its major creditors and lessors before filing for bankruptcy. The cargo carrier has been renegotiating its debt since March, when it announced that it was deferring all payments on debt and aircraft leases for its Boeing 747 planes.

Atlas officials said they cannot predict how long the company might spend reorganizing under Chapter 11 or what the ultimate product might look like. The company cautioned that its existing equity and other securities could be rendered useless or at least worth far less than they are now.

A chief reason for the bankruptcy plan is the fact that the company''s auditor, Ernst & Young LLP, has determined it will be unable to complete a re-audit of Atlas''s 2000 and 2001 financial results. The auditor blamed Atlas''s inability to find necessary financial records from those years for the failure to complete the review. The failure to complete the re-audit puts Atlas in violation with federal corporate accounting and disclosure requirements.

Word that the re-audit was stalling prompted the New York Stock Exchange to suspend trading of Atlas shares on Sept. 5. Atlas stock now is being traded on the Pink Sheets LLC under a new ticker symbol, AAWH. It formerly traded as CGO.

During the past year on the NYSE, Atlas shares ranged from 52 cents to $3.44. When NYSE suspended Atlas trading on Sept. 5, the share price was locked at $1.25.

Atlas shares plummeted on Sept. 10 when it began being quoted on the Pink Sheets. Trading opened at 55 cents and closed at 75 cents.

The Pink Sheets is a privately owned New York City-based company that serves as a venue for over-the-counter securities trading. Named for the color of paper the company''s information historically was printed on, the Pink Sheets is now a centralized quotation service that publishes real-time quotes for over-the-counter securities. Unlike larger exchanges, the Pink Sheets does not require companies whose securities it quotes to meet any listing requirements.

Now that the re-audit of 2000 and 2001 results is no longer under way, Atlas released its unaudited financial results for 2002 and the first two quarters of 2003. The company reported mounting losses, with a $65.3 million loss on $679.4 million in revenue during the first half of 2003. For 2002, it reported a $36 million loss on $1.2 billion in revenue.

"Our financial results continue to reflect the challenges in today''s air-cargo market, as the pricing environment remains depressed due to overcapacity in the marketplace and competition remains strong," Atlas President Jeff Erickson said.

On a more positive note, Atlas reported that its August traffic figures showed a 49.5 percent year-over-year increase in block hours flown for military and commercial charters. Atlas''s ACMI block hours dropped 3.2 percent during the same time period. Also owned by Atlas Air Worldwide Holdings Inc., Polar Air Cargo''s scheduled service increased 69.1 percent from August 2002 to August 2003 in terms of revenue-ton miles. During the year, Polar''s capacity increased 81.5 percent, which resulted in an overall average load factor decrease of 4.2 percentage points to 57.3 percent.

Separately, in an effort to continue trying to renegotiate its debt, Atlas has entered into another forbearance agreement with holders of some of its debt. Holders of its Class A Enhanced Equipment Trust Certificates agreed to give Atlas until Dec. 15 to restructure its debts and leases. The airline entered into a forbearance agreement with these debt holders on July 2. That agreement gave Atlas until Aug. 31 to restructure its debt and leases. Atlas subsequently extended that agreement until Sept. 12, the day it announced the Dec. 15 extension.