New Crew for TWA

Although he is one of the world's wealthiest men, eccentric, elusive Howard Hughes is often short of cash--usually on a grand scale. For the last six months he has been short just $340 million, the money needed to pay for jet planes ordered for his TWA. Hughes, who owns 78% of TWA stock, would have had little trouble raising the money if he had been willing to relinquish his whimful one-man control of the airline. Long accustomed to dictating his own terms, Hughes refused. Wary bankers were equally stubborn. Last week, with time running out as

TWA's debts mounted. Hughes had to knuckle under. He made a deal to raise the money he needs, but only at the cost of giving up control of TWA to a voting trust of his lenders.

No one was happier about the arrangement than General Dynamics' Convair division. For weeks some 14 new Convair 880 jets ordered by Hughes have been parked on the Convair ramp at San Diego's Lindbergh Field, ready for delivery to TWA whenever Hughes paid the $45 million owed on them. All told, Hughes had ordered $126 million worth of jets from Convair, made a $26 million deposit.

Ghost Pilot. Under the new deal TWA will be controlled by three trustees, two representing the lenders and one Hughes, until Hughes pays off the debt. TWA is used to operating with a ghost pilot, has been without a president and chief executive for over two months since ex-Secretary of the Navy Charles Thomas resigned. In two years as TWA boss, Thomas revamped the ailing airline's management, slashed operating costs, turned a $1,764,000 deficit the year he took over into profits of $9,400,000 in 1959. When Hughes first went looking for loan money, a group of banks (headed by Manhattan's Irving Trust Co.) and insurance companies liked the looks of TWA under

Thomas. The group agreed to lend Hughes the money he needed provided there was no change in TWA's management. In characteristic Howard Hughes fashion, he and Thomas had a falling out, and Thomas quit two days before the deal was closed. The banks backed away and Hughes tried unsuccessfully to find the money elsewhere.

New Money. Under the terms of last week's deal, TWA will get $74 million in four-year 6% notes from Irving Trust and eight other banks, and another $94,800,000 in twelve-year equipment bonds from the Equitable Life Assurance Society and the Metropolitan Life Insurance Co. The Hughes Tool Co., which is entirely owned by Hughes and which, in turn, actually owns the TWA stock, will buy $78 million of the $100 million debenture offering, plus any of the rest not picked up by TWA stockholders. TWA will provide $50 million from earnings and depreciation allowances to bring the grand total to almost $319 million in new money, the revised estimate of TWA's needs.

This will mean that TWA, which now leases 17 Boeing 707 jets from the Hughes Tool Co. on a day-to-day basis (and owns only eleven jets), will be able to buy outright its whole jet fleet, which by the end of the year will total 43 planes. The loan total is only slightly more than the profit Hughes could have made by selling his TWA stock at its postwar market peak of 72. Its price at last week's closing: 12 5/8 up 1 1/4 on the news of Hughes's financing deal.

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