Deal offers Continental a lifeline

CONTINENTAL Airlines, the fifth largest US carrier, will be relieved of most of its multi-billion- dollar debt, probably enabling it to survive its current bankruptcy, under a reorganisation plan signed yesterday with Maxxam, a Houston resource conglomerate, writes Larry Black.

The deal would see Maxxam, a firm operating in aluminium, timber and property, and controlled by the investor Charles Hurwitz, inject dollars 350m ( pounds 183.7) into Continental in exchange for a 72 per cent stake in the carrier, with its unsecured creditors assuming the remaining shares.

Continental was forced into Chapter 11 bankruptcy in 1990 because of the debt built up by its former owner, Frank Lorenzo.

The companies said in a joint statement that the investment would 'provide Continental with the financial resources . . . and assure its continued operation as an indpendent company'.

Investors in the deal will also receive ordinary shares with substantial voting rights and warrants to buy a second class of ordinaries.

Continental will also issue up to 75 million ordinary shares that will be distributed to unsecured creditors and other parties.