State Street can Sell More Shares

UnitedChicago

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IRS approves more sales of UAL stock (UAL) By August Cole
The IRS will permit the trustee for United Airlines'' employee stock plan to sell 3.9 million more shares in a move that should protect a valuable tax credit, UAL Corp. said Tuesday. After the sale, the employee stock ownership plan will have about 16 million shares. Other sales will not be permitted, the company said. Shares (UAL) were last halted up 2 cents to $1.08.
 

bigbusdrvr

Senior
Mar 2, 2003
366
12
[blockquote]
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On 3/4/2003 2:10:47 PM UnitedChicago wrote:

IRS approves more sales of UAL stock (UAL) By August Cole

The IRS will permit the trustee for United Airlines' employee stock plan to sell 3.9 million more shares in a move that should protect a valuable tax credit, UAL Corp. said Tuesday. After the sale, the employee stock ownership plan will have about 16 million shares. Other sales will not be permitted, the company said. Shares (UAL) were last halted up 2 cents to $1.08.
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When the employee ownership drops below 20%(sunset level) say good buy to DEN, IAD, &LHR!! UNITED will need the money to offset the missing 388mil. the IRS won't give back!!

No help from the ATSB nor the IRS, a person might think the US gov has it in for UNITED.
 

bigbusdrvr

Senior
Mar 2, 2003
366
12
[blockquote]
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On 3/4/2003 4:42:19 PM UnitedChicago wrote:

Bigbus...the IRS ruled that the sale of 3.9 million shares - effectively ending the ESOP - would not trigger a change in ownership. UA will be able to retain the substantial tax credits.

A more complete story below:

UAL Ruling By IRS May Mark End Of Employee Ownership

By SONOKO SETAISHI

Of DOW JONES NEWSWIRES
NEW YORK -- Potentially signaling the end of the employee ownership of the world's second-largest airline, United Airlines parent UAL Corp. (UAL) said Tuesday the manager of its employee stock ownership plan is now free to sell an additional 3.9 million UAL shares.

UAL, operating under protection from creditors since December, said the Internal Revenue Service has ruled that the additional share sales by State Street Corp.'s (STT) State Street Bank & Trust won't hamper its ability to receive certain tax benefits that it's counting on when it emerges from Chapter 11 bankruptcy-court protection.

The news arrived nine years after pilots, machinists and some other employees of Chicago-based UAL received 55% of the company in 1994 in return for six years' worth of pay and benefit reductions. The arrangement, touted by some as the beginning of a new era of airline management, also gave the labor two seats on UAL's 12-member board. But the experiment failed to change the company's culture or repair the mistrust between labor and management.

Since UAL last year raised the possibility of bankruptcy proceedings, State Street had been selling UAL shares to preserve what was left of the employee-owners' nest eggs. But a bankruptcy court order in December restricted large shareholders, including the employee-owners, from unloading their holdings.

UAL said Tuesday that further sales of UAL stock by State Street may lower employee ownership below 20%, potentially robbing the employee-owners of their 55% voting power and their say on important matters such as acquisitions and chief executive appointments.

There could also be changes in board members, but not with those representing the Air Line Pilots Association, the International Association of Machinists and Aerospace Workers and salaried and management employees, the company said.

Trading in UAL shares were temporarily halted Tuesday afternoon. The stock fell sharply when the trading resumed on anticipation of the massive selling by State Street. The shares ended down eight cents, or 7.6%, at 98 cents.

In a message to members, leaders of the segments of the Machinists union representing United mechanics and ground workers, Scotty Ford and Randy Canale, said: "Although we may be nearing the end of employee-ownership at United Airlines, a renewed partnership between employees and management must be a critical element of the successful restructuring of United Airlines."

The two Machinists officials said the employee ownership helped United preserve jobs and create cost savings that allowed the carrier to thrive through the late 1990's.

"This current crisis is certainly not a result of employee-ownership," they said, blaming management's "costly mergers and risky ventures" for United's woes.

"We continue to oppose the sale of both 401(k) and ESOP shares by State Street," said David Kelly, spokesman for the pilots union. He noted, however, that the sale won't affect the pilots' board seat.

UAL is trying to take advantage of tax code provisions that allow businesses to carry forward their net operating losses to offset future taxable income for up to 20 years.

UAL had feared that it won't be able to tap the provisions should substantial sales of stock or claims trigger a change of ownership. The company said Tuesday the IRS ruled that certain sales of stock by the 401(k) plans managed by Fidelity Management Trust Co. and a mutual fund that had previously held a large amount of UAL stock did not need to be included in the calculation of an ownership change for the purposes of preserving the net operating losses.

After the sale of 3.9 million shares, the employee stock ownership plan will still hold stock convertible into about 16 million UAL shares, the company said.

- By Sonoko Setaishi; Dow Jones Newswires; 201-938-4148; sonoko.setaishi@dowjones.com

Updated March 4, 2003 5:20 p.m. EST


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Correct me if I am wrong, but I believe paragraph 5 allows the board to do as it see's fit wonce employee ownership falls below 20%.

Am I wrong?
 
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UnitedChicago

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Bigbus...the IRS ruled that the sale of 3.9 million shares - effectively ending the ESOP - would not trigger a change in ownership. UA will be able to retain the substantial tax credits.

A more complete story below:

UAL Ruling By IRS May Mark End Of Employee Ownership

By SONOKO SETAISHI

Of DOW JONES NEWSWIRES
NEW YORK -- Potentially signaling the end of the employee ownership of the world's second-largest airline, United Airlines parent UAL Corp. (UAL) said Tuesday the manager of its employee stock ownership plan is now free to sell an additional 3.9 million UAL shares.

UAL, operating under protection from creditors since December, said the Internal Revenue Service has ruled that the additional share sales by State Street Corp.'s (STT) State Street Bank & Trust won't hamper its ability to receive certain tax benefits that it's counting on when it emerges from Chapter 11 bankruptcy-court protection.

The news arrived nine years after pilots, machinists and some other employees of Chicago-based UAL received 55% of the company in 1994 in return for six years' worth of pay and benefit reductions. The arrangement, touted by some as the beginning of a new era of airline management, also gave the labor two seats on UAL's 12-member board. But the experiment failed to change the company's culture or repair the mistrust between labor and management.

Since UAL last year raised the possibility of bankruptcy proceedings, State Street had been selling UAL shares to preserve what was left of the employee-owners' nest eggs. But a bankruptcy court order in December restricted large shareholders, including the employee-owners, from unloading their holdings.

UAL said Tuesday that further sales of UAL stock by State Street may lower employee ownership below 20%, potentially robbing the employee-owners of their 55% voting power and their say on important matters such as acquisitions and chief executive appointments.

There could also be changes in board members, but not with those representing the Air Line Pilots Association, the International Association of Machinists and Aerospace Workers and salaried and management employees, the company said.

Trading in UAL shares were temporarily halted Tuesday afternoon. The stock fell sharply when the trading resumed on anticipation of the massive selling by State Street. The shares ended down eight cents, or 7.6%, at 98 cents.

In a message to members, leaders of the segments of the Machinists union representing United mechanics and ground workers, Scotty Ford and Randy Canale, said: "Although we may be nearing the end of employee-ownership at United Airlines, a renewed partnership between employees and management must be a critical element of the successful restructuring of United Airlines."

The two Machinists officials said the employee ownership helped United preserve jobs and create cost savings that allowed the carrier to thrive through the late 1990's.

"This current crisis is certainly not a result of employee-ownership," they said, blaming management's "costly mergers and risky ventures" for United's woes.

"We continue to oppose the sale of both 401(k) and ESOP shares by State Street," said David Kelly, spokesman for the pilots union. He noted, however, that the sale won't affect the pilots' board seat.

UAL is trying to take advantage of tax code provisions that allow businesses to carry forward their net operating losses to offset future taxable income for up to 20 years.

UAL had feared that it won't be able to tap the provisions should substantial sales of stock or claims trigger a change of ownership. The company said Tuesday the IRS ruled that certain sales of stock by the 401(k) plans managed by Fidelity Management Trust Co. and a mutual fund that had previously held a large amount of UAL stock did not need to be included in the calculation of an ownership change for the purposes of preserving the net operating losses.

After the sale of 3.9 million shares, the employee stock ownership plan will still hold stock convertible into about 16 million UAL shares, the company said.

- By Sonoko Setaishi; Dow Jones Newswires; 201-938-4148; sonoko.setaishi@dowjones.com

Updated March 4, 2003 5:20 p.m. EST
 
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UnitedChicago

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These two paragraphs are interesting:

UAL said Tuesday that further sales of UAL stock by State Street may lower employee ownership below 20%, potentially robbing the employee-owners of their 55% voting power and their say on important matters such as acquisitions and chief executive appointments.

There could also be changes in board members, but not with those representing the Air Line Pilots Association, the International Association of Machinists and Aerospace Workers and salaried and management employees, the company said.


While it's no surprise that upon sunset, labor loses their special governing rights (but it appears not their BOD seat). But...the next paragraph states their could be changes in non-labor board members.

Hmmm...whats up?
 
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UnitedChicago

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Some more info...

The changes provided by the "Sunset" provisions include:

-- Elimination of special Board, Board committee and shareholder votes,
such as for acquisitions, divestitures and CEO appointments, among
others;
-- Elimination of the 55% shareholder voting power of the ESOP;
-- Board discretion to change its committee structure and membership; and
-- Possible changes in Board members, other than those representing the
Air Line Pilots' Association (ALPA), International Association of
Machinists and Aerospace Workers (IAM) and salaried and management
employees. Decisions regarding potential Board nominees would be made
by the Board's outside public directors nominating committee.
 

atabuy

Senior
Oct 13, 2002
419
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I have 2 Questions:

1. If employees shares are worthless after emerging from BK how does owning the stock through BK make a difference after new stock is issued to the dip's and other creditors after BK?
It seems to me that Ual, the company, has the option to pit loses against profits. Not stockholders.

2. If the stock will be worth something after BK why would they sell it now?
 

DB Cooper

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Aug 20, 2002
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March 4, 2003

District 141 - UAL Bankruptcy Update

The IRS issued a private letter ruling to United Airlines stating that State Street Bank may sell 3.9 million UAL ESOP shares without jeopardizing the tax advantages the company needs to successfully restructure. The sale of the additional ESOP shares will trigger the ESOP's "Sunset" provisions, affecting the carrier's corporate governance.

The IAM and our legal and financial advisors have prepared a Q&A in the event the sunset provisions become affected.

UAL ESOP Q&A

Will we receive the proceeds from the sale of our ESOP shares?

The ESOP Committee intends to ask the Company to transfer control of the proceeds from the sale of the ESOP shares to individual employees. The exact mechanism has not yet been determined, but the ESOP Committee and its legal advisors are exploring whether it is possible to transfer control without burdening individual employees with additional tax liabilities. Employees will be advised when a procedure for distribution has been established.

What is the sunset provision?

At the inception of the ESOP, UAL employees held 55 percent of the voting shares in UAL Corp. With that came extraordinary governance controls, such as veto over CEO selection. The sunset provision says the extraordinary governance provisions and majority voting power would be maintained as long as employee-owned shares were equal to 20 percent or greater of common stock. Employee-owned shares included the ESOP shares, the UAL stock held in the 401(k) plans and the Employee Stock Purchase Plan.

Originally, the sunset provisions were envisioned to occur through employees cashing in their ESOP share as they retired or otherwise ended their employment with United Airlines. UAL’s bankruptcy, the 401(k) Plan’s sale of UAL stock and State Street’s sale of ESOP shares significantly accelerated the ESOP’s sunset.

Will the IAM lose its seat on the Board of Directors because of the sunset provision?

No. UAL’s 1994 Revised Certificate of Incorporation allows the IAM to retain the ability to select a Director of UAL Corp. even after the ESOP sunset provision is activated. The IAM Director, however, will have no more power than any other Director of UAL Corp. The extraordinary governance will be eliminated.