jettypeguy
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United snags $1B in loans, buys time to reorganize
By Marilyn Adams, USA TODAY
United Airlines and three big lenders Wednesday finalized $1 billion in new bankruptcy financing that gives the giant airline another year to reorganize in Chapter 11 protection.
The new loan is designed to give United, in reorganization for 19 months, until June 2005 to cut more costs and revise its business plan, said Bill Repko, restructuring chief at J.P. Morgan Chase.
The loan package will be split among J.P. Morgan and Citigroup, United's existing lead lenders, and GE Commercial Finance. United is a significant customer of General Electric, which makes aircraft engines and finances aircraft.
Neither the banks nor United would disclose specific terms or conditions of the loan package.
The new loan agreement "is a positive statement: We wanted to show that United is adequately financed," Repko said. "This will give United adequate liquidity and ample time" to redraw its business plan.
The development comes just weeks after a federal panel denied United's application for a $1.6 billion loan guarantee to help United exit bankruptcy.
The Air Transportation Stabilization Board said United didn't need a federal guarantee to get financing because the credit markets have improved since the Sept. 11 terrorist attacks, which prompted Congress to establish the guarantee program.
United filed for Chapter 11 bankruptcy protection in December 2002 with plans to emerge as a reorganized company by last month. That didn't happen. Now, United must line up private loans or obtain exit capital from an investor who would get a stake in the airline.
Following the government's denial last month, analysts said United's cash could run dangerously low by year's end. At the end of the first quarter, United had less available cash relative to its size than any other major airline. Despite major cuts in labor and aircraft costs, United is posting big losses amid weak airfares and high fuel prices.
GE Commercial Finance confirmed the deal was being finalized Wednesday night.
United spokeswoman Jean Medina said the airline is pleased with the extension.
United's existing bankruptcy loans had been extended to Dec. 31. But industry experts said the new loan deal isn't premature.
"United has to get itself reorganized, so it's not too early," said analyst Ray Neidl of Blaylock & Partners.
Last week, United took another step to bolster cash, deferring a $72 million scheduled payment for its employees' pension plans. Experts say it's a sign United, whose pension plans are underfunded by billions of dollars, may be forced to revise those plans in bankruptcy. Another pension payment is due in September.
By Marilyn Adams, USA TODAY
United Airlines and three big lenders Wednesday finalized $1 billion in new bankruptcy financing that gives the giant airline another year to reorganize in Chapter 11 protection.
The new loan is designed to give United, in reorganization for 19 months, until June 2005 to cut more costs and revise its business plan, said Bill Repko, restructuring chief at J.P. Morgan Chase.
The loan package will be split among J.P. Morgan and Citigroup, United's existing lead lenders, and GE Commercial Finance. United is a significant customer of General Electric, which makes aircraft engines and finances aircraft.
Neither the banks nor United would disclose specific terms or conditions of the loan package.
The new loan agreement "is a positive statement: We wanted to show that United is adequately financed," Repko said. "This will give United adequate liquidity and ample time" to redraw its business plan.
The development comes just weeks after a federal panel denied United's application for a $1.6 billion loan guarantee to help United exit bankruptcy.
The Air Transportation Stabilization Board said United didn't need a federal guarantee to get financing because the credit markets have improved since the Sept. 11 terrorist attacks, which prompted Congress to establish the guarantee program.
United filed for Chapter 11 bankruptcy protection in December 2002 with plans to emerge as a reorganized company by last month. That didn't happen. Now, United must line up private loans or obtain exit capital from an investor who would get a stake in the airline.
Following the government's denial last month, analysts said United's cash could run dangerously low by year's end. At the end of the first quarter, United had less available cash relative to its size than any other major airline. Despite major cuts in labor and aircraft costs, United is posting big losses amid weak airfares and high fuel prices.
GE Commercial Finance confirmed the deal was being finalized Wednesday night.
United spokeswoman Jean Medina said the airline is pleased with the extension.
United's existing bankruptcy loans had been extended to Dec. 31. But industry experts said the new loan deal isn't premature.
"United has to get itself reorganized, so it's not too early," said analyst Ray Neidl of Blaylock & Partners.
Last week, United took another step to bolster cash, deferring a $72 million scheduled payment for its employees' pension plans. Experts say it's a sign United, whose pension plans are underfunded by billions of dollars, may be forced to revise those plans in bankruptcy. Another pension payment is due in September.
