The ruling by Judge Allan Gropper paves the way for the No. 5 U.S. airline to solicit approval from its creditors. The airline intends to exit bankruptcy by the end of June as a streamlined carrier with an equity value of $7 billion.
"Subject to the revisions ... I find the disclosure statement provides adequate information and should be approved," Gropper said of the plan, which is known as a disclosure statement.
Gropper requested that Northwest (Charts) add to its statement certain revisions related to worker compensation.
Flying High
Among the revisions is an agreement by Northwest to honor a bankruptcy claim by workers who hold more than $275 million in special shares awarded in 1993.
The airline also gave up a management compensation claim and offered to pay about 4,000 nonunion workers $77.4 million upon exiting bankruptcy.
Northwest left open the amount of stock it would issue to compensate managers after bankruptcy, but said it would submit information on management equity compensation by Friday.
The airline offered the concessions in hopes of overcoming objections by unions representing its pilots and flight attendants as well as a group of equity investors. Those groups said Northwest's disclosure statement was inadequate in that it featured no details on management equity compensation.
"To the best of our ability, we have attempted to address the objections," Bruce Zirinsky, an attorney for Northwest, told the court during the hearing.
The question of equity compensation leaves a question mark over the plan, because that compensation dilutes the payment unsecured creditors may receive for their claims.
According to the terms of plan approved on Monday, Northwest will give holders of general unsecured claims stock valued at up to 83 percent of allowed claims.
The disclosure statement still needs approval from a majority of the carrier's creditors. The official committee of unsecured creditors, which acts in the interest of all creditors, has said it supports the plan.
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The airline filed for Chapter 11 protection from creditors in 2005 alongside Delta Air Lines (Charts), which also plans to leave bankruptcy this year. Northwest intends to exit bankruptcy with its costs down $2.5 billion a year and its debt decreased by $4.2 billion.
At a similar hearing for Delta in February, the carrier had resolved all outstanding objections before appearing in court.
The airline industry is in recovery mode after a five-year slump triggered by terrorism concerns and low-fare competition. Major airlines have sought to improve their competitive positions by slashing costs.
