MAIR sues Mesaba and its creditors

[JEP]

...

MAIR Holdings is seeking to prevent access to funds paid by the airline that the parent company claims were "appropriate and legal."
Liz Fedor, Associated Press
Last update: October 05, 2006 – 11:44 PM

Regional airline operator MAIR Holdings Inc. on Thursday asked a judge to declare that more than $122 million it received from subsidiary Mesaba Aviation Inc. were properly paid.

In the 3.5 years leading up to Mesaba's bankruptcy filing, it paid more than $122 million to MAIR in dividends and management fees.

Those payments have irked the unions and creditors of the feeder for Northwest Airlines Corp. A committee of Mesaba's creditors has gotten permission from a bankruptcy judge to pursue possible claims against MAIR for the payments.

Mesaba paid $111.2 million in dividends to MAIR from April 2002 until Nov. 30, 2004, beginning with a single $54.2 million dividend paid April 30, 2002. Mesaba also paid management fees to MAIR totaling almost $11 million from 2003 until July 11, 2005, three months before Mesaba followed Northwest into bankruptcy.

MAIR has stayed out of bankruptcy, even though Mesaba provided most of its revenue and nearly all its profits.

In the court filing on Thursday, MAIR argued that Mesaba was solvent and had no expectation that it couldn't pay its bills when it made the payments. And it said the Mesaba board decided not to pay a dividend in February 2005 after reviewing its expected cash flow for the rest of the year.

"The dividends and fees Mesaba paid to MAIR are legitimate, appropriate and legal," MAIR Chief and Executive and President Paul Foley said in a written statement. "The public speculation that these dividends and payments were improper is unsupported by the facts, by the law, and is damaging to MAIR. We are asking the court to rule on this matter and put it to rest once and for all."

Tom Wychor, head of the Mesaba branch of the Air Line Pilots Association, said the bankruptcy judge barred Mesaba unions from making the payments an issue when Mesaba argued for permission to reject its union contracts.

[kellwolf]

Pay attention to the bolded text above. That's the reason the courts started an investigation (asked for by the CREDITORS) into payment transfers from Mesaba to MAIR prior to the bankruptcy filing.....