If you think that hurts, it's down to $1.74 right now (but at least that's a lot better than today's intra-day low of $1.51!)
To put that into perspective, the company's market cap is now under $100 million -- less than the list price of a 767. I suspect it doesn't help that short-sellers are having a field day with the company's stock; it doesn't help, either, that losses through the end of next year will wipe out nearly all of the company's book value.
UA does not have access to the public capital markets and it appears the carrier and the rest of the industry has little ability for a sale and lease back of assets. For UA to obtain a loan guarantee, there must be five individual labor tentative agreements, a ratification period, ATSB application review, and a loan guarantee approval before November 17.
It appears that five weeks may not be enough time to accomplish this aggressive schedule and reports indicate the company and its advisors, bankruptcy experts at law firm Kirkland & Ellis and at investment-banking concern Rothschild North America, are preparing a formal petition.
There is very little time for employees and management, presumably the IAM and AFA to reach meaningful restructuring accords that in my opinion hold the key to bankruptcy avoidance. In addition, ALPA, IAM, and non-contract employees presumably have to give up their board seats and governance clause, for a loan guarantee to be approved. I believe this is a bitter pill for all, but from our experience at US I encourage the UA employees to make this sacrifice to reach 11th hour agreements to prevent a bankruptcy filing.
Enron, WorldCom, & US Airways filed their bankruptcy petition on a Sunday; therefore, some sources believe a UA bankruptcy filing could come as early as Sunday, October 13. If this does not occur, the next likely dates are October 20 or 27.
On 10/10/2002 10:32:16 PM chipmunn wrote:
For UA to obtain a loan guarantee, there must be five individual labor tentative agreements, a ratification period, ATSB application review, and a loan guarantee approval before November 17.
Where does the Nov 17 date come from?
In addition, ALPA, IAM, and non-contract employees presumably have to give up their board seats and governance clause, for a loan guarantee to be approved.
Do you make this stuff up?! Would they have to forfiet ownership of the shares they own? Would they revert to common stock yeilding complete control of the company to the employees? I know that you have those inside connections at the highest levels of government and inside the UAL BOD, but wouldn't ya think some other press outlet would have sources nearly as good (not saying they'd be as connected as you of course) and would be reporting in the media that forfeiture of our ownership rights were a pre-condition?
[BR][FONT face=Times New Roman size=3]Busdrvr:[/FONT][BR][BR][FONT face=Times New Roman size=3]Contacts do not have to be on the Board or the ATSB for one to be told what is occuring. This industry is very fluid and corporate plans are constantly changing with management trying to deal with the financial crisis. Time is short before UA will have to file a bankruptcy petition, but it's my hope the company and all of its employee groups can obtain appropriate accords.[/FONT][BR][BR][FONT face=Times New Roman size=3]Chip[/FONT]
[P][FONT face=Times New Roman size=3][STRONG]Airline pension plans latest threat to cash flows[BR][/STRONG][BR]Credit Suisse First Boston analyst Jim Higgins, who has been aggressive in taking down the airline industry and individual stocks, now says pension plans are the latest threat to cash flows. [BR][BR]In a note to clients, he said the shortfall in revenues would further dampen near-term liquidity -- already pressured by debt payments, capital expenditures and lease payments -- when cash pension contributions are added to the outflow.[BR][BR]The combination of under-funded pension plans and dreadful equity market performance may result in companies having to contribute cash to their pension plans that is far above historic levels, Higgins said.[BR][BR]Certain carriers have company-specific issues that will modify cash outflows over the next few years, Higgins said, [STRONG]but [/STRONG][/FONT][FONT face=Times New Roman][FONT size=3][STRONG]Delta, Northwest and UAL appear especially hard hit. [BR][/STRONG][BR]And that doesn't include a war-risk scenario. Add in the impact of an attack on Iraq, and Higgins said several carriers teeter on required minimum cash levels to avoid bankruptcy, notably AMR, America West and Continental. [STRONG]Higgins has already said he expects to see UAL in bankruptcy.[BR][/STRONG][/FONT][/FONT][/P]
What happened to U's pension fund? Prior to the filing, it was one of the most undefunded. Were the retirement benefits changed in the new contracts to coincide with the fund assest? As to other sources, like I said, if they were even remotely in the know, it would have hit the press by now. Although I've read of how wonderful it would be to steal the company away from the employees in BK (although a BK filing would likely, as at U, include stock and BOD seats for employees), I've yet to see ANY reports that it is a part of the ATSBs requirements. The ATSB has already gotten into some political hot water over some leaks to the press concerning overly onerous conditions, I'd think the political powers that be would blow a gasket if your theory proved true. Don't think the Republican Senatorial Campaign commitee would enjoy losing CO (Allard) over it (there are a BUNCH of UAL employees in CO).
It's not a theory, the ATSB has the governance issue in its cross hairs. Unless something changes, no governance relief, no federal loan guarantee. It's that simple.[/FONT][/P]
[FONT face=Times New Roman size=3]UAL ALPA MEC Chairman Paul Whiteford in a letter e-mailed to members last week, said the airline is at crunch time. He noted [STRONG]time is of the essence[/STRONG]. We are not under any artificial deadlines or any company, ATSB or (union)-imposed deadlines. We are under a [STRONG]practical deadline[/STRONG], one which cannot be postponed, delayed or set aside, Whiteford said. Quite simply, United must have a [STRONG]substantial loan [/STRONG]in place [STRONG]prior [/STRONG]to mid-November.[/FONT][/P]
In a rare I agree with Chip moment, he's absolutely right about the governance issue (allows any 2 of the 3 employee directors to veto certain actions). I've heard that from people inside WHQ as well as on the outside.
Bus, you also asked Where does the Nov 17 date come from?
That's when the first loan payment is due, which you already knew.
With or without a loan, UAL is going to file. Fixing their labor costs is just one of many problems they have to address in short order, and the only way they'll do it is with protection. They'd be foolish to burn cash proceeds from an ATSB loan, knowing that they'll be cash-poor within six months.
The bigger issue for UAL's employees now should be making sure they have S.1113 agreements in place with the company, so that they're a) participating in the recovery and B) protected against arbrogating their contracts when UAL files.
From what I've heard from Whiteford and other ALPA reps so far, I think they have their ducks in a row already. I'm not as conviced about the AFA or IAM, though.
You're correct. Don't worry about ALPA. They'll climb onboard a satisfactory proposal. As you say, it's the AFA and IAM that are wild cards. The perception we keep getting from managers who participate in the weekly Tilton leadership conference call is that all parties realize the situation and continue to make progress. Indications are that significant progress could be reached within the next week. What that means is anyone's guess. My department gets to meet Tilton next week and ask questions so it'll be a good opportunity to get a measure of him and his goals for the company.