Looks like UAL Ain't gettin the Loan

[G4G5]

Hey Ty,

Were the offical statements from the ATSB and the NTSB enough Fact's for you? Or would you like to try and come up with something else?

This is very interesting reading on USAir and their ATSB requirements:
http://biz.yahoo.com/prnews/040312/dcf029_1.html

How about this little FACT?

"US Airways also agreed to a loan covenant that its minimum unrestricted cash balance would not fall below the lower of $700 million and the outstanding balance of the loan at each month "

For a $900 million dollar loan the ATSB REQUIRED a minimum of $700 million of unrestricted cash on hand EVERY MONTH!!!!!!!!!!

 

[G4G5]

How about this part TY:

"The ATSB also gave US Airways permission to sell assets. As part of the agreement, US Airways could retain up to $125 million or 25 percent of the proceeds it receives from such sales. Prior to the agreement, US Airways was expected to apply 100 percent of the proceeds to the loan guarantee. Retaining part of the proceeds could help it meet its goal of increasing cash on hand."

From the Washington Post: I guess they don't print any FACTS?

http://www.washingtonpost.com/wp-dyn/articles/A54770-2004Mar12.html

Prior to the early payment to the ATSB, USAir WAS EXPECTED TO APPLY 100% OF AN ASSET SALE TO LOAN!!!!!!!!!!!!!!!!!!! Heck, they could not even sell an asset WITHOUT the approval of the ATSB.

Now they get to keep just 25% and still require the ATSB's approval.

 

[j41driver]

GOOD, I was getting a little worried...after all, I'm just a regional airline pilot...I'm no better that a piece of street garbage.

Ohhh, by the way, did you see us on the front page of USA Today this week and numerous other newspapers around the country?

ooooo...that's gotta hurt....

I wouldn't start mouthing off quite yet. We still have a long way to go and a lot of competition along the way.

 

[G4G5]

Ty:
"These are not facts, they are suppositions. You suppose that they have to put up assets, but please post facts to back that up, because it doesn't fit in with the other info I have seen."

G4G5:
Is the ATSB, the NTSB, Reuters and the Washington Post enough Facts for you, or are you still going to try and insult me after I tell you I am busy playing with my daughter?
-------------------------------------------------------------------------------

Ty,
"For example, if UAL was offering security (collateral assets) as a guarantee for the loan, why wouldn't Chase or Citigroup make the loan without the guarantee? Answer: it is not a workable deal without Uncle Sam guaranteeing the funds."

I'll break it down VERY simply for you. Have you ever tried to get a loan with bad credit? How about being Bankrupt? Do you think that you would get the same interest rate as someone with good credit? The bank is taking a risk when they loan money to United (vs Southwest). Inturn UAL will pay a much higher interest rate without the government as a cosigner.

The deal is absoultly workable with out the ATSB loan. BUT UAL will pay a much higher interest rate. The second thing is that the banks now get to value the assets that UAL is putting up for collateral (and I am sure that they will be very fair). You really need to do a little research on bond ratings and how they are tied to interest rates.
------------------------------------------------------------------------------------

Ty,
Another reason it doesn't stand to reason that the US taxpayer is protected- UAL has no assets left to leverage. Everything is spoken for, they are in Chapter 11.

G4G5
You really don't understand the fundemantals of the chapter 11 process. UAL has plenty of assets to leverage. Let me ask you this. Who currently owns UAL's Pacific routes and LHR routes? Answer UAL, prove me wrong, I am tired of educating you.

This is the part where a big boy apologizes or just goes away.

 

[G4G5]

Ty,

"The way I understand it, until you can cite definite sources to the contrary, is that when UAL defaults on the loan, the loan is paid by us, the taxpayers."

So let me ask you this, where were you getting your information?

Please explain to us how the US tax payer is left paying for the loan.

The ATSB requires a minimum monthly amout of cash on hand. In USAir's case $700 million for a $900 million dollar loan. So if that is any indication UAL would be required to maintain a minimum of $1.4 billion for an loan of $1.8 billion.

The ATSB required that the sale of any asset be applied directly to the loan. In USAir's case they couldn't sell a thing. As of today they only get 25% of what they sell up to a maximum of $125 million. That would mean anything above $125 million that the Shuttle is sold for goes to the ATSB loan. Leaving the LGA terminal, DCA, PHL, gates slots and routes going directly to the ATSB. Assuming that the $700 millon cash on hand was not enough.

Anyone care to guess the present value of UAL's London routes, gates and slots? How about the Pacific? Or their Domestic gates at LGA, DCA, SFO, yada yada. Even the most conservative estimate places the value of their assets well beyond the $1.8 billion that they are looking for.

 

[G4G5]

The one thing that I have not seen mentioned anywhere is the possibility of UAL repaying the loan.

You do realize that part of the ATSB loan program is:
"The Board may consider the degree to which the government can participate in the gains of the air carrier through warrants or other equity instruments."

Will I be hearing anyone complain where the Taxpayers make a profit from the sale of their UAL stock? Think it can't happen? Anyone remember Chrysler's bailout back in 1979?

The government guaranteed $1.2 billion in loans and received, in exchange, 14.4 million warrants to buy Chrysler common stock for $13 a share. Four years later, in 1983, the government sold the warrants for about $22 a share, at a profit for U.S. taxpayers of more than $300 million.

A $300 million dollar profit in 1983 dollars would equate to how much 20 years later?

Now Ty, just to prove to you that I am not a total A hole. I do agree with you. UAL should not receive the loan but I have my own personal reasons as to why.

Next time don't let your opinion get in the way of the facts.

 

[Ty Webb]

I asked you to provide proof that the loans are secured, and although you have clogged up this string with five posts, what you have posted so far actually reinforces my point.

The very first link you posted didn't say what you thought it said. It said that "preference would be given to loans that are secured", not that the loans are secured.

I will read through the rest of the links at my leisure, but right now, from what I have already seen, you are clearly mistaken.

 

[T-Bags]

"The very first link you posted didn't say what you thought it said. It said that "preference would be given to loans that are secured", not that the loans are secured.

I will read through the rest of the links at my leisure, but right now, from what I have already seen, you are clearly mistaken."

Maybe you should check the rest of the links so that you can quit appearing to be a fool.

"Contrary to your speculation, we will be able to repay these loans. The capital markets validated this when JPMorgan and Citigroup agreed to back $2 billion in exit financing for the company -- including a total of $400 million in non-guaranteed, at risk financing. This 20% non-guaranteed portion is greater than that included in any loan the ATSB has approved thus far. And, in the worst case, these loans will have collateral coverage worth two to three times the loan amount, which assures ultimate taxpayer recovery."


Glenn F. Tilton
Chairman, President and CEO
United Airlines
Chicago

 

[Ty Webb]

The first link he posted was garbage- read it yourself. He misunderstood it. You think I should spnd my time now following every other link he posted, if he doesn;t understand that one?

You guys go on believeing whatever you want. In the end, it's not going to matter anyway.

Have a nice life.

 

[G4G5]

Your pathetic.

The facts are there anyone can read them and all you can say for yourself is, I can't be can't be bothered.

Ty:
"The very first link you posted didn't say what you thought it said. It said that "preference would be given to loans that are secured", not that the loans are secured."

How many times do I have to tell you the LOANS ARE SECURED!

"The ATSB Loan is secured by first priority liens on substantially all of the unencumbered present and future assets of the reorganized Filing Entities (including certain cash and investments accounts, previously unencumbered aircraft, aircraft engines, spare parts, flight simulators, real property, takeoff and landing slots, ground equipment and accounts receivable), other than certain specified assets, including assets which are subject to other financing agreements. "

http://biz.yahoo.com/e/040507/uair10-q.html


If you had any creditability with anyone on this board you just lost it.

I ask you simple questions like, where did you get your information? and you come up with nothing, nada, zipo. You ask me and I provide quotes and web sites. Absolutly pathetic. Admiting you are wrong is part of being an adult. I don't argue with children.

You just got added to my ignore function, may I suggest others do the same

My life is nice.

 

[Ty Webb]

You can't spell, you take up 5 posts to try to make your point, and the first link you post makes it clear that you don;t even understand what you are linking to . . . . and then you wonder why I can't be bothered?

PS., try posting sober if you think you have something worth saying.

 

[G4G5]

Spelling is eaisly fixed, stupidity is not

"Sober" you are just beyond belief.

I just did KHPN, EGGW, EFHK, ZBAA and PANC. Also known as, around the world in under a week. Why else would I be up at 1:45 in the morning wasting my time with you.

Still no answers to my questions or facts to back up your opinions.
Just like everyone of your posts. I should have know better.

Time for bed.

 

[Dizel8]

G4G5,

Just curious, why you say: "I do agree with you. UAL should not receive the loan but I have my own personal reasons as to why.", since you are and have always been, a staunch supporter of UAL.

Thanks,
D8

 

[merikeyegro]

Someone has still failed to answer this question: If UAL is a secure company with assets to back up a loan from Citigroup and JP Morgan Chase, why does it need the federal gov't to guarantee its repayment?

I think that's quite the simple plan, right there. No guarantee = no loan. Thus the loan is dependent upon federal guarantee of repayment. If the assets sold don't cover the loan amount, the feds (we) pick up the tab. This is, in essence, an IMF loan on a smaller scale. In any case, it's still a bailout. It may not be a cash infusion, but it's a guarantee that UAL won't have to worry THAT MUCH about repaying, since the gov't will pick up the tab should things get too hairy.

Keeps them from having to deal with all those pesky courts and stuff...D@mn creditors...

 

[FDJ2]

Someone has still failed to answer this question: If UAL is a secure company with assets to back up a loan from Citigroup and JP Morgan Chase, why does it need the federal gov't to guarantee its repayment?

I'm just speculating, but it might have something to do with the interest rates UAL would receive from their lenders.

 

[Dizel8]

"I'm just speculating, but it might have something to do with the interest rates UAL would receive from their lenders."

You are indeed correct.

If UAL were to obtain funds not backed by the ATSB, the lender would require the financial return to be in direct relation to the risk involved, meaning much higher interest rates.

With the ATSB guaranteeing repayment, there is less risk, hence lower interest rate.

 

[Dizel8]

From another source, more news on UAL:
By Caroline Daniel in Chicago
Published: May 23 2004 17:34 | Last Updated: May 23 2004 17:34

United Airlines has warned that its fuel costs this year will be $750m higher than it had first estimated and has downgraded an earnings forecast made only five months ago, casting doubt on the airline's chances of securing a critical US government loan guarantee.


The deteriorating financial situation, which includes reducing its operating earnings for 2004 by $776m, was disclosed in a filing with the bankruptcy court late on Friday. The revisions contrast with the upbeat impression executives at the world's second-largest airline have sought to convey in recent weeks of steady restructuring progress.

The filing instead suggests that higher fuel prices have eroded the limited financial cushions United had built into its plan, and that it is failing critical coverage ratio tests that providers of exit financing usually demand as a condition of providing funds.

The fuel crisis comes as the Air Transportation Stabilisation Board, the federal body set up after September 11 to aid the airline industry, is preparing to decide on whether to grant United a $1.6bn loan guarantee.

If the ATSB says no, United faces an uncertain future as it has few other sources of financing available to help it come out of bankruptcy.

The ATSB is expected to make a decision by the end of June.

According to the filing, United updated its business plan at the end of April to include higher fuel costs and pension relief.

Although the airline has hit revenue forecasts, the new plan, dubbed Gershwin 4.1, forecasts United will generate $606m less in net cashflow and $776m less in operating earnings in 2004 than it had forecast in December.

United also said it was failing to meet important coverage ratios - the ratio of its free cashflow divided by fixed cash obligations, mainly pension funding and servicing debt.

It said lenders typically want a ratio of 1.3 before they provide financing. "Skyrocketing fuel costs have reduced United's projected coverage ratio in 2004 from 1.29 to just 0.68. United now satisfies the 1.3 coverage ratio requirement in 2005, 2006 and 2007 by only the thinnest of margins," the filing said.

Moreover, it added that a 1.3 ratio is usually acceptable to lenders only at the start of a loan.

"The steadily increasing coverage ratio that lenders expect to see, as was the case in Gershwin 4.0 (albeit minimally), does not surface in Gershwin 4.1 at all until 2008."

United said its financial situation underlined the need for cuts to its retiree welfare benefits, which remain the highest in the airline industry.

 

[Ty Webb]

Originally posted by Dizel8

If the ATSB says no, United faces an uncertain future as it has few other sources of financing available to help it come out of bankruptcy.

This would seem to back up what I said- without the guarantee, Citgroup and Chase are NOT willing to invest one thin dime in UAL.

It is NOT just a matter of the interest rate, it is a matter of i being a bad loan, one that I, as a taxpayer, am not willing to make.

Maybe the State of IL will loan you the money, if you grease enough palms.

 

[T-Bags]

"It may not be a cash infusion, but it's a guarantee that UAL won't have to worry THAT MUCH about repaying, since the gov't will pick up the tab should things get too hairy.

Keeps them from having to deal with all those pesky courts and stuff...D@mn creditors..."

What an ill-informed post . Have you been following the U case? The government has been FAR more ruthless in it's quest to protect it's assets than any of the other creditors. They have been forced to make the payments when the payment were due, with only minor mutually benefitual changes.

As for the government involvement, lets consider what would happen if UAL went TU. Then the government would take control of a good half of UAL fleet of around 55 777's, 33 747-400, 37 767-300's, 96 757-200's, 152 or so A319/320's, and 149 737-300/500G's. The government could then slowly bring them to market and possibly even just transfer some over to the military.

Now lets pretend they go the loan from an industry shark. Now the rates are significantly higher, increasing the probability of default. Now if there was a default, all those jets hit the resale market the same day. So what do you think that would do to boeing? Would that be a good think in your vastly experienced CFI world?

Dizel,
G4G5 is an AMR pilot. A UAL failure would be very good for AMR, especially if they were able to get the Pac routes. Even if UAL didn't "fail", a UAL with a much higher debt cost would also benefit AMR. In any case, a VERY good set of posts by G4G5. Of course Ty is too stupid to get it. I posted a DIRECT QUOTE from Glenn Tilton stating that the loan would be backed by 2 to 3 times the loan value worth of collateral, and he still can't figure it out. What a moron.

 

[T-Bags]

Originally posted by Dizel8

If the ATSB says no, United faces an uncertain future as it has few other sources of financing available to help it come out of bankruptcy.

This would seem to back up what I said- without the guarantee, Citgroup and Chase are NOT willing to invest one thin dime in UAL.

It is NOT just a matter of the interest rate, it is a matter of i being a bad loan, one that I, as a taxpayer, am not willing to make.

Maybe the State of IL will loan you the money, if you grease enough palms.

Are honestly that fricken stupid? Those are some of the SAME banks that put up $1.5 billion in DIP financing for UAL, when they were doing MUCH worse financially.

 

[G4G5]

Hi D8,

The ATSB is very clear, "The borrower must demonstrate that it has incurred or is incurring losses as result of the September 11, 2001 terrorist attacks."

I personally don't feel that all of UAL's problems were created on Sept. 11

The economy was shifting prior to 9/11 and one could eaily argue that UAL's problems have have as much to do with James Goodwin's poor mgt.

Could their problems be related to the Tilton's continued poor mgt. The current price of fuel, the increased competition of LCC's, a US economy, a weak US dollar. yada yada. If your answer is, yes, then by defination UAL is not entitled to the ATSB gurantee.

Let's try to remember it is 2004. They have been operating under the protection of Ch11 for a year and a half. While the events of September 11 were tramatic. It's hard to pin the demise of UAL completly on those events.

I also don't believe that the LCC's and majors are not getting treated fairly, when the government offers to back a loan based upon the events almost 3 years ago. Traffic has rebounded people are flying again. If not for the current price of fuel many an airline would be operating in the black.

Morally, I don't feel that government money should be used to support weak mgt. UAL had it's chance and they were denied. What does it tell you when the ATSB comes out publicly trashing your business plan?

It's a capitalistic society, jungle rules apply. I don't recall the government offering to bail out Pan Am when they were burdened with the same things that are hurting UAL today. Funny thing, Pan Am has to divest London and the Pacific for exactly the same reasons. Yet, today we are concerned with bailing out UAL. It just doesn't seem right. I also feel that UAL would never sell the Pacific. London maybe but not the Pacific. It would truly mean the end of UAL. All you need to do is look at USAir, even in their curent financial situtation, they still have managed to hold onto all of their assets.

Do I feel sorry for UAL, absolutly. Like most of us on this board, I have friends at UAL. Would it I like to see them recover, Yes. But it's not up to me. If they get it so be it. I can live with it either way.

But in no way is the American tax payer left footing the bill. I fact as shown with the Chrysler loan, the tax payer could actually make some money.

 

[Dizel8]

T-Bags,

Not quite sure what you are trying to say, but if I read it correctly, these banks were probably counting on the ATSB stepping in and providing the guarantee.

Further, I am not sure, what kind of financial exposure they had to UAL, but it may have been substantial and they may have been better off, having UAL not go Ch.7, I know Bank One has a bit of dough tied up in UAL.

There is tremendous upside possible investing in UAL, but also tremendous risk associated with it. In 20/20 hindsight, what with the current state of affairs in this business, who knows if these investment houses, would have done it all over again.

Of course, sadly we must remember, these investment companies do not care about the great airline called United, but only about money. If it becomes too financailly risky, they will simply accept the loss and pull the plug.

 

[FDJ2]

Hi D8,

The ATSB is very clear, "The borrower must demonstrate that it has incurred or is incurring losses as result of the September 11, 2001 terrorist attacks."

I personally don't feel that all of UAL's problems were created on Sept. 11

PMFJI, but the ATSB's mandate is if the borrow has incurred or is incurring losses as a result of the September 11, 2001 terrorist attack. It is not the borrowers economic problems are only due to the terrorist attack. Certainly UAL, which lost two aircraft and several crews has incurred a significant loss directly from 9-11 and certainly UAL can demonstrate a cliff like drop in demand immediately following 9-11. If AWA could get an ATSB loan due to 9-11, than certainly UAL should. Can anyone really argue that UAL is any less entitled to the ATSB loan than any of the other LCCs and network carriers that have already recieved an ATSB loan?

 

[Lequip]

No Loan or Bail Out? Boo-Hoo. Glad my Tax $$'s are going elsewhere!

 

[T-Bags]

Glad my Tax $$'s are going elsewhere!

You'd prefer it go to unemployment checks?