Bk End Is Drawing Closer....financing Announced
- Thread starter UALDC767
- Start date
Hey WT,
Can you spin us a "feel good Delta" story on why it is good that Delta is paying 11.198 percent for financing while United is paying 8.94%?
It must be because they have a fool proof plan to become the bestest company in the whole, wide world, huh? 
Can you spin us a "feel good Delta" story on why it is good that Delta is paying 11.198 percent for financing while United is paying 8.94%?
It must be because they have a fool proof plan to become the bestest company in the whole, wide world, huh? Fly said:Hey WT,
Can you spin us a "feel good Delta" story on why it is good that Delta is paying 11.198 percent for financing while United is paying 8.94%?
[post="309957"][/post]
To be fair, the DL rate is on the DIP financing and the UA rate is for its exit financing. Fair comparison would be to quote the current UA DIP rates. Anybody have that number handy?
WorldTraveler
Corn Field
- Dec 5, 2003
- 21,709
- 10,721
FWAAA said:
The point is not that UA hasn't reduced its secured debt through BK - it has and I quote a figure of at least $750M. However, they turned around and took on $3B more in debt. I'm at a loss as to what is going to make the balance sheet so lean.
United Chicago,
The point of the discussion I am having is to discuss points of a business nature about the airlines. In case you missed it, I have posted on many occassions a number of errors and deficiencies w/ DL's operation and business plan. I am fully capable of speaking the truth about any carrier that operates - and I have done it.
Fly,
any union group that agreed to have their pensions funded from the corporate treasury was asking for it to be terminated in time. However, with all due respect for the DL pilots (and am I correct that UA had a similar supplemental pension?), that is not the kind of pension that I believe should be preserved. Judge Beatty (DL's BK judge) has not ruled on whether DL should continue funding the pensions but by the time she does, DL will have terminated the supplemental pension using section 1113. At most the pilots are going to get one more month of pay - and that is far from guaranteed. The creditors have every expectation that the money in DL's corporate restructuring will be used for operating the business - and bankruptcy law is very supportive of the concept that pre-petition employee obligations cease w/ a Ch. 11 filing and the Ch. 11 filing supersedes collective bargaining agreements when it comes to protecting corporate assets.
767 and dc3,
your dissent is respectfully noted.
WorldTraveler,
It's not that folks on this board are touchy regarding criticism of United, it's that your heavy-handed criticism of UA rings awfully hollow when you consider that you're a Delta-loving sycophant. When not clobbering the turn-around efforts of UA, you're the official Gerald Grinstein cheerleader on the Delta board. I think you need to work on your credibility regarding issues related to UA.
It's not that folks on this board are touchy regarding criticism of United, it's that your heavy-handed criticism of UA rings awfully hollow when you consider that you're a Delta-loving sycophant. When not clobbering the turn-around efforts of UA, you're the official Gerald Grinstein cheerleader on the Delta board. I think you need to work on your credibility regarding issues related to UA.
The point is not that UA hasn't reduced its secured debt through BK - it has and I quote a figure of at least $750M. However, they turned around and took on $3B more in debt. I'm at a loss as to what is going to make the balance sheet so lean.
While I don't have the time or inclination to get into the details of the debt reorganization at UAL on one of my few days "off", let me again reiterate some points about the restructured UAL
- Total debt will likely, IMO, be approx 8 billion. This will be a little higher thn was originally planned due to the convertible notes UAL is issuing (which will ideally cease to be debt in the not so distant future. UAL did reduce a great deal of it's secured debt (off the top of my head, I'd have to recheck the accounting rules) when it restructured many of it's capital leases into normal leases. By doing so, UAL took a charge for the equity in the jets, and discharged the remaing debt.
- On the issue of an Equity investor.
-- TPG et al make a huge amount of dough in this area simply because they get an inordinate share of the company's equity and virtually all the control for pennies. A creditor likes it because it offers "free money" from their standpoint to help bolster the balance sheet. They don't want control, they want their money back with interest. An Equity investor screws the unsecured creditors though, because they get even less than they would have. If you can avoid an equity investor, it is best to do so so the unsecured creditors can be better compensated.
-- From DAY 1, UAL has made it's plans to emerge WITHOUT equity. Mr. Tilton said it to my face in Feb 2003. This is nothing new.
- As to "experts" not saying things are perfect with the plan, no worries: Who do you think the rags quote? It would be the perverbial "things were great today" newspaper headline. It just doesn't sell. UAL will emerge, and they will make money IMMEDIATELY.
- One more point from some of the more ignorant talking heads with respect to finance. The issue of oil prices being a problem merely looks at a static DCF spreadsheet and changes the cost numbers. A more reasonable (as reasonable as a DCF spreadsheet can be given it's inherant limitations) approach would be analysing the future cash flows via a Monte Carlo simulation that recognizes the correlation between oil prices and ticket prices. The correlation may not be 1 but it ain't zero either. Additionally, higher oil prices will have the effect of "thinning the herd" at some point resulting in increased pricing power for the remaining airlines. With the new cost structure at UAL (and what will likely be the structures at DAL and NWA), it won't be the LCC's that take advantage of any market share opportunities.
While I don't have the time or inclination to get into the details of the debt reorganization at UAL on one of my few days "off", let me again reiterate some points about the restructured UAL
- Total debt will likely, IMO, be approx 8 billion. This will be a little higher thn was originally planned due to the convertible notes UAL is issuing (which will ideally cease to be debt in the not so distant future. UAL did reduce a great deal of it's secured debt (off the top of my head, I'd have to recheck the accounting rules) when it restructured many of it's capital leases into normal leases. By doing so, UAL took a charge for the equity in the jets, and discharged the remaing debt.
- On the issue of an Equity investor.
-- TPG et al make a huge amount of dough in this area simply because they get an inordinate share of the company's equity and virtually all the control for pennies. A creditor likes it because it offers "free money" from their standpoint to help bolster the balance sheet. They don't want control, they want their money back with interest. An Equity investor screws the unsecured creditors though, because they get even less than they would have. If you can avoid an equity investor, it is best to do so so the unsecured creditors can be better compensated.
-- From DAY 1, UAL has made it's plans to emerge WITHOUT equity. Mr. Tilton said it to my face in Feb 2003. This is nothing new.
- As to "experts" not saying things are perfect with the plan, no worries: Who do you think the rags quote? It would be the perverbial "things were great today" newspaper headline. It just doesn't sell. UAL will emerge, and they will make money IMMEDIATELY.
- One more point from some of the more ignorant talking heads with respect to finance. The issue of oil prices being a problem merely looks at a static DCF spreadsheet and changes the cost numbers. A more reasonable (as reasonable as a DCF spreadsheet can be given it's inherant limitations) approach would be analysing the future cash flows via a Monte Carlo simulation that recognizes the correlation between oil prices and ticket prices. The correlation may not be 1 but it ain't zero either. Additionally, higher oil prices will have the effect of "thinning the herd" at some point resulting in increased pricing power for the remaining airlines. With the new cost structure at UAL (and what will likely be the structures at DAL and NWA), it won't be the LCC's that take advantage of any market share opportunities.
Regarding UA's emergence from BK, does anyone have any theories to how this might effect Frontier or Northwest? Certainly won't be pretty but what would be a likely scenario should UA turn the screws on NW and/or Frontier. Hard to imagine things getting any worse at NWA but the harsh reality is that from an employee perspective the real storm has yet to arrive.
cheers
bigsky
cheers
bigsky
767jetz
Veteran
- Aug 20, 2002
- 3,286
- 2,779
WorldTraveler said:
You have it backwards WT. No one was willing to give US Airways or America West debt financing. They were forced to seek equity investment to raise capital in order to reorganize. These equity investors then have strict control over the direction of the company. Management is often replaced. Companies lose control of their destiny and are subject to the whims of who provided the money, up to and including selling it off. Look what Frank Lorenzo did to TWA.
Tilton said all along that he was not interested in equity investors. It is better for the employees and the company. You don't go to loan sharks for money when you have the backing of the largest financial institutions in the world.
