Looks like UAL Ain't gettin the Loan

[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?