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Spokane, Washington  Est. May 19, 1883

Judge Balks At Offer For Pan Am Takeover Expert Carl Ican Wants To Buy Bankrupt Airline In Deal Worth $43 Million

Catherine Wilson Associated Press

Financier Carl C. Icahn offered Friday to buy Pan Am in a $43 million deal to get the airline flying again, but a bankruptcy judge was unimpressed with his plan.

“I don’t see it as the solution to the Pan Am problem,” U.S. Bankruptcy Judge A. Jay Cristol said, noting it would require the company to sell off its best assets.

“We talk about Mr. Icahn riding up with $43 million,” Cristol said. “He may have $43 million in his pocket, but he’s only going to put $8 million on the table.”

Icahn, a takeover expert who ran TWA from 1985 to 1993, emerged from a group of five investors to offer $25 million for operations, $10 million to cover unused Pan Am tickets and $8 million for the well-known name and some real estate.

The $8 million would be the only money distributed to Pan Am creditors who don’t hold tickets. Ticket holders would get coupons for 20 percent off flights, up to the full value of their original tickets.

Under the Icahn offer, flights could resume in three to four months, said his attorney, Thomas Lauria. To close the deal in 30 days, Icahn would need labor contracts, a reservation system, leases on seven jets and federal transfer of Pan Am’s certificate to fly.

Cristol said he owed “a great debt of thanks” to Icahn for appraising the airline’s assets, but said his bailout gave no guarantee of resumed flights.

“I don’t see this deal on its present term sheet as what we need here,” the judge said. “Time is running out. The losses are bleeding the airline dry.”

Cristol said he would like to see an investment to get the airline flying again, a business plan for a shrunken carrier that could rebuild over time or, as a last resort, liquidation.

Another bankruptcy hearing was set for Monday to draft bidding procedures. If someone else makes a better offer, Icahn wants a $1 million breakup fee from Pan Am to step aside.

Pan American World Airways Inc. and Pan American Airways Corp. sought protection from creditors on Feb. 26 with $50 million in assets and $147 million in debts.

Paul Singerman, attorney for creditors, said he hoped Icahn’s offer is “far from the last word in the transaction.”

Icahn’s plan does not specify how many employees would be retained, but Pan Am workers would be given preferential hiring if scheduled flights resume. The revived airline’s routes have not been disclosed.

Pan Am World Airways - which originally started in 1928 and was one of the most recognized airlines in the world - went bankrupt and shut down in 1991 in the wake of the 1988 bombing over Lockerbie, Scotland, which killed 270 people.

The Pan Am name was sold at a bankruptcy auction and used to start a new airline two years ago. Apart from the logo and a few employees who came to the new company, there was little in common between the old international carrier and the new version.