United Agrees To Give $1.5 Billion Note To P B G C

[FWAAA]

UAL agrees to give the PBGC a series of notes with a face value of $1.5 billion to settle claims relating to its underfunded pensions. Anyone think the court will approve this?

UAL Settles Pension Claims for Up to $1.5 Billion

Wednesday April 27, 11:28 am ET

CHICAGO (Reuters) - United Airlines has agreed to pay up to $1.5 billion to settle claims by federal pension insurers in bankruptcy court and clear the way for the government to assume control of its underfunded employee retirement accounts, court documents showed on Wednesday.

The No. 2 U.S. airline, a unit of UAL Corp., and the Pension Benefit Guaranty Corp. reached an agreement on Friday for the agency to take over the airline's four major pension plans, which are underfunded by nearly $10 billion.

According to details of the agreement disclosed in court papers, the government said it would drop claims as an unsecured creditor in exchange for $1.5 billion that will be received once United emerges from Chapter 11 protection. United says fair value of the notes issued in the settlement will probably be less than the face value.

http://biz.yahoo.com/rb/050427/airlines_un...sions.html?.v=2

Note the last sentence: The notes will likely be nearly worthless.

 

[ualdriver]

UAL agrees to give the PBGC a series of notes with a face value of $1.5 billion to settle claims relating to its underfunded pensions. Anyone think the court will approve this?
http://biz.yahoo.com/rb/050427/airlines_un...sions.html?.v=2

Note the last sentence: The notes will likely be nearly worthless.

[post="265009"][/post]​

It doesn't say the notes will be nearly worthless. That's an assumption you're making, and it's a stretch, particularly *IF* UAL exits bankruptcy and thrives a bit.

 

[767jetz]

o.com/rb/050427/airlines_un...sions.html?.v=2[/url]

Note the last sentence: The notes will likely be nearly worthless.

[post="265009"][/post]​

WTF are you talking about??? If the face value of something is $100, and the actual value is $99, then that would be less wouldn't, but almost full value. Wouldn't it?

Talk about leaping to conclusions! :blink:

 

[Borescope]

Note the last sentence: The notes will likely be nearly worthless.

[post="265009"][/post]​

Typical rethoric from an AA employee :down: Your time is coming, you know what they say, What goes around.................

 

[enilria]

Typical rethoric from an AA employee :down: Your time is coming, you know what they say, What goes around.................

[post="265056"][/post]​

While I doubt the note would be worthless immediately, I wouldn't doubt it over time.

By the way, United gave the pilots a $550m note on top of this $1.5b note for a total of $2.05 billion in new debt post-CH11. Oh, and that is debt on top of the exit financing they haven't gotten yet. They are looking for $2b in exit financing. So now we are talking about at least $4.05b in new debt at the point they exit. Notes are interest bearing as will be the exit financing. Let's say they get the deal of the century (given their credit rating of ZERO) and pay 8% on these debts. $4b x 8% interest = $320 million per year in new interest expense.

Since the company is losing money hand over fist now and isn't paying any debts or interest, where exactly will the income to offset this new $320 million annual interest expenses come from? Ever think of that?


P.S. The $320m is on top of the mortgage aircraft debt interest they are not currently paying (unless they wish to return more aircraft) which is several billion more dollars in obligation and is financed at more like 12%. Add another $400m in interest expense they aren't paying now.

 

[spacewaitress]

If that's the scernario, guess where they will get the $$

 

[Borescope]

BOHICA :mf_boff:

 

[Falco]

Excellent thread. Note all the debt United will be piling up just to exit BK. Anybody who thinks UAL will exit lean and mean (other than employee pay) is smokin dope. But I do think UAL will get out at some point.

 

[Busdrvr]

Excellent thread. Note all the debt United will be piling up just to exit BK. Anybody who thinks UAL will exit lean and mean (other than employee pay) is smokin dope. But I do think UAL will get out at some point.

[post="265091"][/post]​

In the case of the pilot group's note, I'd suggest you guys first figure out what "convertible" bonds are. I'd bet the PBGC bonds will be also.

 

[aafsc]

In the case of the pilot group's note, I'd suggest you guys first figure out what "convertible" bonds are. I'd bet the PBGC bonds will be also.

[post="265104"][/post]​

You are exactly right Busdrvr. When/if Ua emerges from BK (which I think they will) they will have wages comparable to USAir with no pensions and the right to outsource anything and everything. This bottom of the barrell compensation in the context of a consolidated industry which will cause yields to rise and the possibility of slightly lower oil prices in the future could very well induce the "conversion" of these bonds to equity. The pilots could very well get a large chunk of (if not all) of their pension back as a result of these financail instruments.

 

[Busdrvr]

You are exactly right Busdrvr. When/if Ua emerges from BK (which I think they will) they will have wages comparable to USAir with no pensions and the right to outsource anything and everything. This bottom of the barrell compensation in the context of a consolidated industry which will cause yields to rise and the possibility of slightly lower oil prices in the future could very well induce the "conversion" of these bonds to equity. The pilots could very well get a large chunk of (if not all) of their pension back as a result of these financail instruments.

[post="265119"][/post]​

While your sarcasm is noted, the real value in conv notes is the conversion value. The note part just gives you a little more security.

as to wages, had AMR matched the UAL work groups from the beginning, it would probably not have been UAL going BK. Keep in mind, it took BK to to get paycuts at UAL (from industry leading), while it only took "BOOH" to get every group at amr to run like a little girl.

 

[aafsc]

While your sarcasm is noted, the real value in conv notes is the conversion value. The note part just gives you a little more security.

as to wages, had AMR matched the UAL work groups from the beginning, it would probably not have been UAL going BK. Keep in mind, it took BK to to get paycuts at UAL (from industry leading), while it only took "BOOH" to get every group at amr to run like a little girl.

[post="265131"][/post]​

I agree. The votes for ramp/mechanic/ and flight attendants were close ( and disputed). Our agents are non-union. But our pilots passed theirs by a pretty good margin 70% in favor if I remember correctly. They were terrified over losing their pensions. Ironically, Carty offered to pay the AA pilots the same industry leading pay rates as the UA and DL pilots got but the APA refused the offer because of another contractual item that they were not happy about.

 

[enilria]

While the notes may be convertible, unless fuel comes down in price and the industry rights itself dramatically there would be no incentive to convert an interest bearing security into stock.

Further, I read the conversion was to preferred stock which is also interest bearing...so it makes little difference. If they file a second chapter 11 (look at history, it usually takes two to get things fixed) at which point both the note and the preferred stock would be unsecured and totally worthless.

 

[eolesen]

If they file a second chapter 11 (look at history, it usually takes two to get things fixed) at which point both the note and the preferred stock would be unsecured and totally worthless.

[post="265213"][/post]​

Key point.

 

[enilria]

Key point.

[post="266097"][/post]​

Sadly I think they ARE already looking down the road to the next Chapter 11 filing. It is becoming increasingly clear they are going to emerge (eventually) loaded with new debts they cannot ever pay off. I think they actually gave up on fixing their problems with this filing and are simply trying to patch things together enough to get exit financing and refile a year later ala their ideological mentor --- US Airways.