USAir plans to offer stock, seek loans to survive recession Carrier may need up to $600 million


Anticipating another money-losing year, USAir Group Inc. is taking steps to raise the cash it will need to ride out the current slump in the airline industry.

Still suffering from depressed demand brought on by the recession, the Persian Gulf war and the current fare war, USAir is searching for cash.

Industry analysts say the carrier could need up to $600 million in additional funds this year to make ends meet.

In an effort to raise funds, the Arlington, Va.-based carrier is seeking the approval of the Security Exchange Commission to issue $200 million in preferred stock as a source of extra cash and is also looking to sell or refinance a portion of its 454-plane fleet.

"They want to boost liquidity because this is a difficult time in the airline industry and the economy," said Mark Daugherty, an analyst in Dean Witter Reynolds' New York office.

The carrier has filed for SEC approval to issue 4 million depositary shares, each valued at 1/100th of a share of Class B cumulative convertible preferred stock. USAir chose to offer the depositary shares -- units of the 95,000 preferred shares outstanding -- in an effort to make the offering a more attractive one to investors.

This way, USAir can offer the units for $50 a share, rather than asking investors to pay $5,000 per share.

In hopes of earning an additional $240 million, USAir has hired Transportation Group Ltd., a New York airline investment bank, to find investors willing to loan money to the airline. A portion of USAir's fleet will be collateral.

USAir owns 167 planes outright, valued at $1.4 billion. The

carrierhopes to borrow $240 million from private and institutional investors using about 50 of the planes as collateral, said John V. Pincavage, a partner with Transportation Group Ltd.

The investment bank is "going all around the world," trying to interest investors in buying into the loans, Mr. Pincavage said.

The firm went to Japan last week and addressed 100 Japanese investors on the prospect of getting in on what promises to be a high-yield investment, said Mr. Pincavage, who hopes to complete the transaction by the end of April.

In addition to its loan recruitment, USAir also may try to sell and lease back at least 23 of its debt-free planes as another means of raising additional cash.

USAir said it will use the proceeds from the stock sale, its efforts to generate fresh cash using planes as collateral and the refinancing of some planes to decrease its $2.4 billion in long-term debt and $1.17 billion revolving credit loan.

Dean Witter's Daugherty estimates that USAir will need to bringin $600 million in additional cash above last year's performance to comfortably meet its financial obligations due between now and the end of the year.

The carrier ended last year with a costly fourth-quarter restructuring and a net loss of $454 million. As the close of the first quarter approaches, USAir's operating losses for the period will probably exceed the $168 million shortfall the company posted in the fourth quarter of 1990, the company said in a filing with the SEC Thursday.

Looking ahead, however, profit ability will remain elusive, the company said in documents submitted to the SEC.

Benefiting from lower fuel prices and a moderate pickup in demand for air travel, year-end 1991 operating results should show an improvement over last year's $350 million loss, however, the company said in a statement.

The first and fourth quarters are traditionally the weakest for the industry.

Last year's fourth quarter results were further weighed down by USAir's $90 million in charges associated with a corporate restructuring.

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