NEW YORK (AP) -- A group of creditors owed $240 million by TWA went to court today to try to call in their collateral, a request that could possibly force the debt-plagued airline to seek bankruptcy protection or halt much of it operations.
A court hearing was scheduled in federal court in White Plains, N.Y. to decide whether to grant the preliminary injunction requested by holders of TWA's 15 percent senior secured notes, a court clerk said.
The hearing raised the possibility that TWA may seek bankruptcy court protection from creditors to avoid the injunction, said Barry Ridings of Alex. Brown & Sons, the financial adviser to the creditors.
Another possibility is that TWA could reach an agreement with the creditors prior to the hearing, he said. TWA declined comment on the subject.
The hearing comes at a particularly tenuous time for the airline, which has been verging on bankruptcy since early this year when it defaulted on several debt payments.
On Monday, TWA made an offer to buy its bankrupt sister Pan Am in a joint proposal with American Airlines worth a total of $450 million. United and Delta came up with a new joint $495 million proposal that could pressure TWA to up its offer.
The creditors' notes in question today are dubbed "light bulb bonds" because they are backed by spare parts on TWA planes as well as by TWA's rights to 180 slots at four major airports, which is essentially TWA's right to enter or exit the runways.
TWA defaulted on a $18 million debt payment to the light-bulb creditors on Feb. 1. Another $18 million interest payment is due Aug. 1. The light-bulb creditors are owed a total of $240 million.
Calling in the collateral could crimp in TWA's operations because "there are some engines in that collateral part that are needed for them to operate a good part of their schedule," said Raymond E. Neidl, an airline analyst for Dillon Read & Co. Inc. in New York.
TWA general counsel Mark Buckstein declined comment on the hearing, saying it was TWA's policy not to talk about discussions with creditors.