The Retirement Systems of Alabama, which already wrote off its $240 million investment in US Airways Group Inc., took a pass on investing in the carrier's merger with America West Airlines Inc., Phoenix.
"What we did was take a calculated risk; we could have said we want to be a major player in this (the new company to be formed by the merger), but we decided not to put up a cent," said Dave Bronner, chief executive officer of the $30 billion, Montgomery-based pension fund.
Mr. Bronner also is chairman of US Air, Arlington, Va., a title he'll relinquish once the new company is formed.
The Alabama fund owns 37.5% of the airline. He said Alabama could recoup some of its US Air investment if a federal bankruptcy court in Alexandria, Va., approves the merger, although he wouldn't speculate on how much that would be.
As for the write-off, he said: "We're talking about an investment that was less than 1% of our total assets. At the end of the year, we were still up by $5.3 billion. That's the real story."
The net value of the new company is estimated at around $850 million. Under the terms of the merger agreement, new equity investors — which have agreed to pump about $350 million into the company — will get a 41% stake in the combined airline. America West's shareholders will get 45%, and US Air shareholders, including Alabama and other creditors, will get 14%. The bankruptcy court will decide how much of that 14% each US Air creditor will get.
Investors in the new company include ACE Aviation Holdings Inc., parent to Air Canada, and private equity firms PAR Investment Partners and Peninsula Investment Partners.