Exit Financing - all threads merged

ohcaptainron

Member
Sep 12, 2002
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December 09, 2003
United exit financing pact near: sources
(Reuters) — United Airlines, still hoping for a first-half 2004 emergence from bankruptcy, is close to lining up about $2 billion in exit financing commitments from three institutions, sources familiar with the matter said on Tuesday.
Co-arranging the loan, which would be contingent upon winning a loan guarantee from the federal government, will be Citigroup and J.P. Morgan Chase, sources said

"The papers are not signed yet, but the details are almost completely agreed," said one source involved in the discussions, who asked not to be identified.
United, a unit of UAL Corp., filed the biggest bankruptcy in aviation history exactly a year ago. While it is still geared toward getting out of bankruptcy in the spring of next year, some big factors still need to be ironed out, including potential Congressional action to address about $4.8 billion in underfunded pensions through 2008.

Exit financing provides a liquidity cushion for a company as it emerges from bankruptcy. Those financing discussions are soon to wrap up, sources said, even though the pension outcome remains in doubt as lawmakers approach the holiday recess.

A United spokesman declined to comment on the exit financing discussions.

The Air Transportation Stabilization Board, created after the 2001 hijack attacks to hand out up to $10 billion in credit assistance to needy carriers, last year rejected United's initial request for backing of most of a $2 billion loan.

The ATSB minced no words last year saying United's business plan was flawed and later told the carrier to fix its pension liabilities before resubmitting its aid request.

United was forced into bankruptcy after the stabilization board's decision. Since then, the airline has sharply cut operating costs by renegotiating union contracts, aircraft leases and deals with suppliers, among other things.

Getting the agency to approve a revised business plan is critical to the airline's emergence strategy.

Several sources said the non-government-backed piece of the overall $2.0 billion loan was likely to be about 20 percent, or $400 million — rather than the traditional 10 percent — to show a vote of confidence in the airline's plan for operating successfully once it gets out of Chapter 11.

Also said to be part of the financing structure — likely as part of the non-government-guaranteed piece — is Bank One Corp., according to sources. Bank One provided part of the special bankruptcy loans called debtor-in-possession financing based on its lucrative frequent flyer credit card relationship with United.

United, the world's second largest airline, has been lobbying Congress recently for relief from certain funding requirements as lenders negotiated the exit financing details.

Sources said the airline is prepared to file an amended plan for a loan guarantee soon, even though Congress has delayed action on the pension issue.

BIG ISSUE

United hoped to resolve the pension issue by year-end. But on Monday, the U.S. House of Representatives headed home for the holidays without acting on a Senate proposal that included both a temporary interest rate fix and extra relief for severely underfunded plans.

At one point, the airline had floated the idea it might seek up to $2.5 billion in exit financing.

"It will be in the $2 billion range as opposed to some bigger number," said one source familiar with the ongoing discussions. The reason is that United's cash flow has improved such that the larger number is not needed.

Still in discussion is what buyers will ultimately want the government-backed paper, which one source referred to as the "gold standard" among various types of issues.

"That's not trivial," the source said of the syndication discussions.
 
Furthermore, UAL says it nearly has its Exit Financing in Place

United Airlines' Exit Financing Pact Near

According to this article, exit financing will be in the form of loans, backed by the ATSB, not asset sales to USAirways or at general auction.

No mention of what an ATSB denial would bring, but I guess we'll get there when / if we get there.

I guess ACAA should take note! Their bargaining position just got stronger... Hundreds of RJ's and no where else to fly them...
 
A similar article was published this afternoon by Susan Carey of Dow Jones Business News/The Wall Street Journal. Read it here.

One noteworthy excerpt from the article:

The fact that the two big banks fought to get the business independently "is a sign that people are beginning to like what they see," said one individual with knowledge of the situation.
And another:

The version of the UAL business plan that lenders looked at, and the one that is expected to go to the loan-guarantee board, foresees only modest, achievable pension relief. "United can argue that pension cash flow can only get better," said one individual familiar with the company. "The strategy is to put out a program they can beat."

Another person who has seen the plan said the assumptions "are pretty modest. It doesn't assume a big recovery. It's financeable."
All in all, some real good news for United.
 
COSMO, please lets keep this quiet for as long as possible, I do not want to upset the CHIP.
 
Poor you-know-who is probably up late, burning the midnight oil trying to come up with some negative spin on this.

Can't wait to hear it!

Maybe we'll hear that RSA is actually going to buy Citigroup and J P Morgan Chase, so that they can gain control United and fragment it into USAir's Premium route structure.

Poor guy. I feel bad for him. :( (NOT!)

This is awesome news! :up: Let's all keep the momentum going!
 
Bill Warlick, an analyst for Fitch Ratings, said United's plan is contingent on stock market gains, rising interest rates and improved financial performance by the company. Any or all of of those might not happen, he said.



"There's no guarantee they will have the liquidity to meet those obligations in the latter part of the decade," Warlick said. "They may be pushing out a bow wave of obligations that will ultimately have to be met.
 
whatkindoffreshhell said:
I trust the ATSB. I do not trust JPMorgan or Citibank.

The ATSB isn't in this game for a commission check.
Can you explain what you mean by this? Nobody is going to lend UAL money because they are altruistic, including the government. Besides, the government isn't lending the money, they are just guaranteeing it if UAL defaults. That way UAL can negotiate a better rate of interest (not comissions) because the risk to the lenders is minimized. The fact that banks who are in business to make money feel safe enough to fight over investing in a post-bankruptcy United is a good thing. In any case, why would would you fear JP Morgan or Citibank any more than any other exit financing provider? You never know, Ornstein might be in the shadows with his own financing package. :eek: One way or another, somebody is going to provide the financing, so it might as well be some big banks.
 
Chip Munn said:
However, as I have recently said the Pittsburgh hub negotiations are being held hostage to United's exit financing ...
Chip:

According to this Dow Jones Business News/Wall Street Journal article by Susan Carey issued yesterday afternoon, United is supposedly within a few days of signing an agreement with J. P. Morgan and Citigroup for $2.0 billion in exit financing to emerge from Chapter 11. How will this change in United's situation affect the Pittsburgh hub negotiations?
 
Bizman said:
"There's no guarantee they will have the liquidity to meet those obligations in the latter part of the decade," Warlick said.
There is no guarantee of ANYthing that far into the future in this industry.

What a stupid comment.
 
>>Bill Warlick, an analyst for Fitch Ratings, said United's plan is contingent on stock market gains, rising interest rates and improved financial performance by the company. Any or all of of those might not happen, he said.<<

Gee, another analyst with a gloomy picture about UAL, what a surprise.

The fact is, we're making money, and banks are lining up to provide exit financing for us. I'd say we're doing pretty well.
 
Who was the first to publicly post on this board that UAL management was looking for exit financing from Wall Street types rather than Barnum & Bailey's Bama Circus?
It may have been me (I'm not 100% positive), but I know one thing for sure. IT WASN'T CHIP! :bleh: :up:
 
whatkindoffreshhell said:
I trust the ATSB. I do not trust JPMorgan or Citibank.

The ATSB isn't in this game for a commission check.
Is that a joke? Did AMR, CAL, and NWA lobby JP or Citi to deny UAL the loan? Would they even waste time bothering? Do they demand an equity stake just for giving a LOAN? The ATSB is political. every dime UAL gets from a bank without ATSB backing is less equity they have to give to the Feds. I'd prefer they didn't even bother with the kangaroo court.
 
Bizman said:
Bill Warlick, an analyst for Fitch Ratings, said United's plan is contingent on stock market gains, rising interest rates and improved financial performance by the company. Any or all of of those might not happen, he said.



"There's no guarantee they will have the liquidity to meet those obligations in the latter part of the decade," Warlick said. "They may be pushing out a bow wave of obligations that will ultimately have to be met.
EVERY PENSION PLAN IN EXISTANCE rely's on markets going up, as well as the sun coming up. Do you think long term interest rates will stay at current levels forever? As far as improved company financial performance, is there a company in the world that can guarentee improved financial performance?
 
Busdrvr said:
The ATSB is political. every dime UAL gets from a bank without ATSB backing is less equity they have to give to the Feds.
I think there's even more to the story. Earlier this week I read (in Aviation Daily, IIRC) that, in addition to America West giving equity to the Government in return for the loan guarantee it received, the airline also pays the government an 8 percent annual fee on the guaranteed balance outstanding on a certain date each year. For United, 8 percent of the additional $200 million that will not be guaranteed amounts to an annual savings for the carrier of $16 million. To put this savings into perspective, that would buy about half of a new A319 every year!