United gets $2 billion loan from two banks, but pension bill stalls
December 10, 2003
UAL Corp. Tuesday received a $2 billion vote of private-sector confidence that it can escape bankruptcy reorganization in one piece, but its search for a similar boost was grounded in Congress.
J.P. Morgan Chase & Co. and Citigroup Inc. joined forces to underwrite a $2 billion loan that will clear a flight path for the parent of United Airlines from bankruptcy protection. Bill Repko, head of the J.P. Morgan's bankruptcy-financing group, enthused, ''We think the world of United and what this management team has accomplished.''
UAL, the world's second-largest airline behind American Airlines, filed the industry's biggest Chapter 11 bankruptcy a year ago Tuesday.
UAL plans to emerge from Chapter 11 by the middle of 2004. The company has said it still must complete negotiations to reduce aircraft debt and lease payments on a large number of planes; seek U.S. government approval for a loan guarantee, and find a way to make, postpone, or avoid payments to its underfunded employee pension plans.
But a bill that would allow it to delay those payments stalled in Congress on Tuesday, and lawmakers headed home for the holidays. The bill, which would save companies $25 billion over two years in pension costs, was designed to forestall a scheduled change in the formula that determines how much companies must pay to support their pension plans. Some House and Senate lawmakers wanted a special provision to exempt airlines and other businesses with large pension shortfalls from federal regulations that require companies to quickly make up plan losses.
In one of their last acts before adjourning the Senate for the year, Republican and Democratic leaders agreed on a procedure to consider the airline aid and vote on the bill soon after Congress returns Jan. 20.
Companies have argued that a change in the standard scheduled to take effect Dec. 31 will exaggerate their pension obligations. Low interest rates are weakening pension plans because their investments aren't earning much interest.
The bill would calculate a company's pension obligation using a mix of corporate bond rates, which would result in less of a liability. For years companies used a rate based on the 30-year Treasury bond, which the government no longer issues, to determine their pension contributions.
Lawmakers have several months next year to consider the issue before pension contributions are due on April 15.
House Republican leaders tried unsuccessfully Monday to unanimously pass a pension bill with a provision that would delay the pension payments troubled airlines make to their general pension funds. Rep. Jeff Flake (R-Ariz.) objected, saying the aid would put airlines with sound pension programs at a disadvantage.
Sen. Dick Durbin (D-Ill.) warned that a delay "...is going to frankly dig them into such a deep hole in bankruptcy that they may never come out.''
Bloomberg News, AP
December 10, 2003
UAL Corp. Tuesday received a $2 billion vote of private-sector confidence that it can escape bankruptcy reorganization in one piece, but its search for a similar boost was grounded in Congress.
J.P. Morgan Chase & Co. and Citigroup Inc. joined forces to underwrite a $2 billion loan that will clear a flight path for the parent of United Airlines from bankruptcy protection. Bill Repko, head of the J.P. Morgan's bankruptcy-financing group, enthused, ''We think the world of United and what this management team has accomplished.''
UAL, the world's second-largest airline behind American Airlines, filed the industry's biggest Chapter 11 bankruptcy a year ago Tuesday.
UAL plans to emerge from Chapter 11 by the middle of 2004. The company has said it still must complete negotiations to reduce aircraft debt and lease payments on a large number of planes; seek U.S. government approval for a loan guarantee, and find a way to make, postpone, or avoid payments to its underfunded employee pension plans.
But a bill that would allow it to delay those payments stalled in Congress on Tuesday, and lawmakers headed home for the holidays. The bill, which would save companies $25 billion over two years in pension costs, was designed to forestall a scheduled change in the formula that determines how much companies must pay to support their pension plans. Some House and Senate lawmakers wanted a special provision to exempt airlines and other businesses with large pension shortfalls from federal regulations that require companies to quickly make up plan losses.
In one of their last acts before adjourning the Senate for the year, Republican and Democratic leaders agreed on a procedure to consider the airline aid and vote on the bill soon after Congress returns Jan. 20.
Companies have argued that a change in the standard scheduled to take effect Dec. 31 will exaggerate their pension obligations. Low interest rates are weakening pension plans because their investments aren't earning much interest.
The bill would calculate a company's pension obligation using a mix of corporate bond rates, which would result in less of a liability. For years companies used a rate based on the 30-year Treasury bond, which the government no longer issues, to determine their pension contributions.
Lawmakers have several months next year to consider the issue before pension contributions are due on April 15.
House Republican leaders tried unsuccessfully Monday to unanimously pass a pension bill with a provision that would delay the pension payments troubled airlines make to their general pension funds. Rep. Jeff Flake (R-Ariz.) objected, saying the aid would put airlines with sound pension programs at a disadvantage.
Sen. Dick Durbin (D-Ill.) warned that a delay "...is going to frankly dig them into such a deep hole in bankruptcy that they may never come out.''
Bloomberg News, AP
