Loan

[767jetz]

2. Wall Street does NOT have much confidence in United's ability to become a viable enterprise - the fact that they want most of the loan ATSB guaranteed (vs. an unsecured loan on the "strength" of the United name) means that they believe an unacceptably high likelihood of default exists.

Sorry, but you're wrong again.

The ATSB only requires that 10% of the money be unsecured. UA's agreement with JP Morgan & CitiGroup includes 20% unsecured funds. This is a very clear vote of confidence. Since the 2 largest financial institutions in North America have signaled this clear vote of confidence, I would say your comment about Wall Street not having confidence is way off base.

Additionally, there is NO indication that these 2 banks will not loan the money without ATSB backing. So again your theory is just wishful, anti-UA thinking.

It's very simple... ATSB backing equals lower interest loan... No ATSB backing equals higher interest loan.

 

[avek00]

avek00, it's no more unreasonable to believe that UA has come up with a viable business plan. They're under new management, and if Gordon was able to turn CO around under its conditions in 1994, it's possible for UA to be turned around in 2004.

BTW, can I suggest that you leave out the "H" when you say "IMO" in the future? Little of what you post comes across as "humble," so "IMHO" just puts a farcical tone on the whole post.

1. The question is not whether UA CAN turn itself around, the question is whether it WILL. FWIW, Tilton was in charge of the final pre-BK ATSB application, which was rejected due to unrealistic projections. I have no clue as to whether or not reality has set in @ UAWHQ vis-a-vis application submissions; history says probably not, but I am willing to wait and see for as long as UA's lenders and the ATSB are.

2. The "H" in IMHO admittedly stands not so much for humble (though I try) so much as for Honest. Unlike the folks @ UAWHQ, I have no reason whatsoever to sugarcoat or distort my opinions or anaylses of United, so I call it as I see it.

767jetz:

It doesn't matter whether 10% or 20% of the loan is unsecured. The bottom line is that the loan as currently structured is NOT primarily unsecured (or secured by UA itself ), and does NOT (AFAWK) contain provisions that will allow for the disbursement of funds absent ATSB approval. Heck, if UA could have gotten funds without ATSB approval, it could have avoided Chapter 11 in the first place!

Despite all the blue-skies talk, the fact is that Wall Street isn't willing to risk a major investment on United without SOMEONE ELSE co-signing on the loan. Don't kid yourself: the lack of an ATSB approval doesn't mean just a higher interest rate, it means NO LOAN WHATSOEVER. THAT is why United keeps taking the lumps from ATSB -- it has no viable painless alternative.

 

[GuppyPup]

http://www.msnbc.msn.com/id/4569780/

U.S. agency subpoenas airlines over loan board

 

[WorldTraveler]

Not sure what concerns the Treasury Dept. but it isn't an endorsement of the ATSB program. It's also noteworthy that Treasury was the only representative on ATSB who voted against reworking terms on USAirways' loan. Just another cloud on United's horizon....

 

[Borescope]

there is NO indication that these 2 banks will not loan the money without ATSB backing.

These quotes from USAToday last week, don't sound like a big vote of confidence in our favor. The last quote say it all.



CHICAGO (AP) — United Airlines said Thursday it will take longer than planned to get out of Chapter 11 bankruptcy, telling federal bankruptcy court it would be premature to emerge by June 30 as intended since several critical issues are still unsettled.


"The bottom line is they need to get that unfunded pension liability issue solved before they can get the loan guarantee," he said.


" restructuring efforts have since stalled."


"The exit financing that United obtained hinges on the loan guarantee being approved."

 

[G4G5]

Another thing to consider is the Song factor.

Greinstein over at DAL has stated that he is opposed to the airline within an airline concept. Mullen is gone and so is Reid. Song is on life support.

I would expect to see Greinstein pull the plug and declare it was a waste of time. My date for his announcement, the week prior to the board meeting for UAL's ATSB loan.

That would further weaken UAL's business plan.

TED??????????

 

[Winglet]

What in the heck is "TED" anyway, besides a paint scheme?

 

[novaqt]

Winglet:

TED is the new brand name for United's new LCC. TED is a point to point carrier with its very own identity, but still falls under UAL, Inc. TED, as you say, has its own paint scheme to set it apart from mainline. It has a much more casual and fun approach to its marketing and meant for United's leisure markets. Despite what some of the naysayers on this board try to lead everyone to believe, TED will continue to grow into more and more leisure markets as the baby boomers retire and travel more and more. The demand for leisure markets will be low prices for years to come.

 

[whatkindoffreshhell]

Winglet:

TED is the new brand TED will continue to grow into more and more leisure markets as the baby boomers retire and travel more and more.

Problem is, TED & UA can't wait for all these baby boomers to retire.

And who really thinks that JP Morgan & Citibank will offer UA a loan if even the ATSB (i.e. United States Federal Government) decides UA is too risky?

Would you?

 

[novaqt]

Whatkindoffreshhell:

Do you sit in main conference room of Kirkland & Ellis? What makes you think that JP Morgan and Citibank haven't already decided to go with the loan under different term if the ATSB loan isn't approved? Simply put, if the loan is not granted, interest rates for repayment will be higher than they would be under a loan guarantee. With those two lending institutions onboard, what makes you think that other lenders, perhaps foreign lenders, might not want to come on board also? Frankly, with gas prices so high right now, I would rather see United stay in BK until petroleum prices come down and stabilize.

 

[767jetz]

And who really thinks that JP Morgan & Citibank will offer UA a loan if even the ATSB (i.e. United States Federal Government) decides UA is too risky?

I do. And so do many others.

You're missing the point. Assuming a pension resolution is forthcoming from congress, if the ATSB says no it will be because they believe UA can secure the financing without their co-signature. Why do you think they want UA to request $1.5 Billion instead of $1.6 in gov't secured money. The ATSB believes UA is becoming LESS of a risk, and can get more unsecured money from the banks. The ATSB will only back a loan as a last resort.

This is actually a catch 22 for UA. The healthier they become, the less likely the ATSB will back a loan. UA is walking a fine line. But as has been reported many times before, UA will emerge from CH11 one way or another.

 

[avek00]

The banks have ALREADY deemed United to be too risky of a $1B+ investment on its own, hence the need to seek an ATSB guarantee in the first place.

 

[Fly]

No Avek, You are DEAD WRONG! (I always wanted to say that). UAL never went to the banks first, they applied for the loan (along with many other airlines that chose to go this route)

Interesting how a loan GUARANTEE (not a loan) was established for airlines affected by 9/11 yet they chose to not approve it for one, of the only two airlines, most affected. hmmmmm, politics in action! Also noteworthy that there are now subpoenas issued on Saturday pertaining to this board. The Times also said the government sought information about the airlines' dealings with a former senior stabilization board executive and staff. Do you suppose that this "senior" board executive wasn't being objective? hmmmm, interesting. The paper said the government wants receipts for meals, airline travel, gifts, loans or discounts covering a period from January 2002 through January 2004. Memos, faxes, and e-mail were also included. Then the article stated: Inspectors general usually investigate fraud and government waste but can also probe other problems within agency programs. Oh my, say it ain't so....a corrupt government official?!? I'm shocked!

Based on the fact that the Stabilization Board was founded to "stabalize" the industry, but the BK of United did anything BUT stabalize the industry may be interesting to note. Do you suppose other carriers used financial means to sway these 3 people? These 3 people acted without much supervison or guidelines, that we do know. But, as we know, give people power without any accoutability and supervision, it tends to be abused! Ask my supervisor.....she calls us in for every infraction, imagined or not! Thank you sir, may I have another?

 

[Fly]

Agency Subpoenas Airlines Over Loan Board
Saturday March 20, 5:34 pm ET
By Kathy Fieweger and John Crawley


CHICAGO/WASHINGTON (Reuters) - U.S. Treasury Department (News - Websites) investigators have subpoenaed airlines for records related to their dealings with the federal board that oversees loan guarantees to struggling carriers, industry officials said on Saturday.
Three airlines, United Airlines (OTC BB:UALAQ.OB - News), US Airways (NasdaqNM:UAIR - News), and America West Holdings (NYSE:AWA - News) all confirmed that they had received orders from the agency's inspector general, Jeffrey Rush, Jr., to turn over documents and other information.

A Treasury Department spokeswoman refused to comment on the matter.

The New York Times, which first reported the story, said five airlines confirmed they had received subpoenas on March 12.

The newspaper did not name the carriers but said the list included those that received or applied for loans from the Air Transportation Stabilization Board and those that did not. Most major carriers opted against seeking federal credit assistance, wary of government interference in their business operations.

Officials at bankrupt United, which is seeking a $1.6 billion loan guarantee, and US Airways, which got a $900 million one last year, confirmed the subpoenas but declined to discuss the issue further other than to say they were cooperating.

But Phoenix-based America West, which also received a loan guarantee, said the inspector general ordered the carrier to provide documents relating to correspondence with board members and staff.

"America West is happy to respond and comply with the request in a timely manner," the airline's senior vice president for public affairs, C.A. Howlett, told Reuters.

The Times also said the government sought information about the airlines' dealings with a former senior stabilization board executive and staff.

The paper said the government wants receipts for meals, airline travel, gifts, loans or discounts covering a period from January 2002 through January 2004. Memos, faxes, and e-mail were also included.

The stabilization board's three members are comprised of officials from the Transportation and Treasury Departments and the Federal Reserve.

Inspectors general usually investigate fraud and government waste but can also probe other problems within agency programs.

The stabilization board was created by Congress after the Sept. 11 2001 hijack attacks to administer $10 billion in loan guarantees to struggling airlines.

Several small airlines and only a few big carriers applied for the aid mainly because of the tough eligibility requirements and strict repayment terms.

The board, which has finished its work except for the United application, has been very selective in approving requests.

 

[Bizman]

if the ATSB says no it will be because they believe UA can secure the financing without their co-signature.

Shouldn't it say "if the ATSB says no it will be because the don't believe UA's business plan is solid?" This was the case the first time around wasn't it?