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"When America West went into bankruptcy, there was $200 million of unencumbered assets on the balance sheet that I, as a bondholder, could look to for recovery," says investor Licht. "Now there's nothing. They're wiped out. They don't have a single asset that they look to, they own, that they can sell. Everything is mortgaged up to the hilt."
As a result of the two rounds of emergency financing, the airline has already acknowledged that bondholders like Licht and stockholders--many of them airline employees who were required to buy shares in the company--are almost certain to receive nothing for their investments if the airline successfully reorganizes.
Instead, the companies that have lent America West money since it went into bankruptcy are now first in line to be paid if the company becomes profitable, or to pick the carcass if it dies.
Hopes that the latter will not come to pass have now largely--and quite publicly--been placed in the hands of Symington's money raiser, William Franke.
@body:For the moment, the silver-haired Franke enjoys a general reputation as the wizard who could save America West. His standing is unique in a state where countless would-be business magicians sawed their own companies in half during the past decade.
Franke has emerged from the economic carnage with his reputation relatively unscathed. In fact, of the "Ten Most Powerful Individuals in the State" named by the Arizona Republic in 1981, only Franke made the list again in 1991. Most of the others had by then presided over some of the state's largest financial disasters.
Attorneys and officials for many of America West's creditors say they only know about Franke what they have read in the paper. (Franke sits on the board of directors of Central Newspapers Inc., owners of the Arizona Republic and Phoenix Gazette, which pitched $550,000 into the financing package.)
But that hasn't stopped some from being effusive in their praise.
"Bill Franke's got a reputation for saving companies that are in dire straits," says Richard Delafield, chairman of the equity creditor's commitee for the bankruptcy. "He's Symington's man and that's good enough for me."
Unmentioned in the celebration of his ascension at America West has been Franke's service in various capacities at four of the state's largest companies--Southwest Forest Industries, Circle K, Phelps Dodge and Valley National Bank--as they spiraled into the financial problems from which they ultimately had to be saved. Southwest Forest was sold, Circle K remains in bankruptcy attempting to reorganize and Phelps Dodge and Valley National Bank pulled out of their financial tailspins.
Depending on the definition, Franke's touch has not always been golden.
From 1975 to 1987, Franke presided over Phoenix-based Southwest Forest Industries, first as president and then as chairman and chief executive officer of what was once the state's only Fortune 500 company.
The biography on Franke handed out by America West Airlines after he was named board chairman notes--and the Arizona Republic dutifully reported--that the company's revenues tripled during Franke's tenure.
But the company also suffered $100 million in losses during Franke's years there, according to press accounts from the time. After profitable years in the late 1970s, the company undertook an expensive expansion just as the housing and paper markets--the company's twin pillars--took a dive.
By 1986 one analyst called Southwest "one of the most inefficient paper companies in its industry." The troubled company rebounded some after that assessment, but ultimately was sold to Stone Container Corporation after losing money for four of the last five years of its existence. Franke's "golden parachute" at sale was worth up to $792,000, according to news reports at the time.
In context Franke says his years at Southwest Forest were a success. The company always had a positive cash flow, he says, and sold for a good price at the end. Events beyond his control--recession, paper markets and the like--hurt Southwest Forest, he says.
Others at the time, however, cited overambitious expansion and too much debt for Southwest's woes--the very same problems that have landed America West in its current state.
Even Franke, describing Southwest now, offers a characterization that fits America West Airlines today as much as it did Southwest Forest Industries in the mid-1980s.
"[Southwest] was fairly confused, had trouble identifying its mission," he says now. "It went through some extremely difficult times. We had to do a lot of surgery on that company and redefine its mission."
However history judges his tenure at Southwest Forest Industries, Franke went on to a career as a sort of corporate circuit rider, serving on the boards of many of the state's largest companies. He also formed his own financial consulting firm, Franke and Company.
The 55-year-old has developed a reputation as a corporate troubleshooter, and prides himself on it.
"I don't really view myself as one of those hired gun, turnaround guys," Franke says. "I view myself as someone who has a pretty good practical sense, and I have over the years developed reasonably good people evaluation skills and planning skills."
Franke himself cites Circle K, Valley National Bank and Phelps Dodge as evidence of his turnaround acumen. Despite the general impression of recent news reports that Franke was called in to help each of the troubled companies, however, in all three cases he was on the scene as the troubles developed, and did not necessarily have a major hand in repairing them.