UAL and thier plans

[P3-Adub]

2.9 Billion ???

I knew that we had about 4 billion that was being burned through pretty fast however I don't recall United getting a 2.9 billion loan right after 9/11 ??? Could it be that the news got it wrong once again ? I know some of the folks here bite at every tidbit of news that comes across as gospel, especially when it is of the negative variety about another carrier other than their own. I too am guilty of this as I get a lift when I hear something positive about UAL. Considering how often the media screws up facts about this industry, it makes one wonder how dependable and acurate other news is ??? Just this morning, the Rocky Mountain News' story about pilot unions & contract negotiations shows an A320 and states that " the captain prepares his 737 for departure", they cannot even get the correct plane named for the shot. Point of this reply is that the story can be slanted any way the author wants it to. Freedom of speech, a wonderful thing !

I think that if UAL had gotten a 2.9 Billion loan right after 9/11 the situation would not be near as dire as it is today. Remember, they could not get loans and that was the reason for the push for the Federal Loan gaurantee in the first place.

The big lady is waiting outside the door but she aint singing yet !

 

[pilot141]

A4 and P-3;

My understanding of DIP financing is that the new debtors (ie the banks that lend the money) actually own parts of the company as collateral on their loans. The initial $800 million was divided among four banks, and they each took something that they thought would be worthwhile. One bank took the reservation system, another took European slots, etc. These are hard assets that the banks can hold against loaning a bankrupt company money.
The actual terms of the DIP financing a VERY strict, from what I have seen. UAL is REQUIRED to post an operating profit by the end of Feb, and must continue to post a profit every quarter unitil late 2004, when they are REQUIRED to have posted $1.6 Billion in net profit. The losses that they are incurring every day now count against this total, so they not only must overcome these losses but also make enough money to erase them and THEN make $1.6 billion.
This is not a good situation, and it is a shame that everyone at UAL is paying for the mistakes of a few very poor management decisions.
If UAL does not meet its DIP covenants, the banks can declare the company in default on its loans and immediately reposses the assets pledged as collateral. This would mean, in effect, liquidation for the company.
I will make no predictions, other than that it will be very interesting to watch what happens at UAL. I hope all of my friends still have jobs in 2003, but I will not place money on that.