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UA to get 3 billion loan to exit C11.

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  • tenthije
    Harrie Spotter
    • Jan 2000
    • 5102

    UA to get 3 billion loan to exit C11.

    Abbreviated version of the article that can be found here:
    http://www.united.com/page/framedpag...7,1376,00.html


    CHICAGO, Oct. 6 , UAL Corporation today announced that JPMorgan and Citigroup will be joint lead arrangers for a $3 billion all-debt exit financing package with very competitive terms. This marks a significant step forward to United's anticipated exit from bankruptcy in February 2006.

    "United's restructuring positions the company to compete successfully with the strongest airlines and to confront ongoing industry volatility," said Glenn Tilton, United's chairman, CEO and president.

    The commitment letter signed by United earlier today is for $3 billion of debt financing with a term of six years. The loan's interest rate is LIBOR* plus 450 basis points and has minimal amortization.

    James B. Lee, vice chairman of JPMorgan Chase: "United has highly attractive assets and a tested, successful management team. The company has proven its ability to navigate through difficult and volatile circumstances while continuing to improve its operations and financial performance."

    "United has made significant progress and has dramatically improved every aspect of its business," said Chad Leat, head of global credit markets for Citigroup corporate and investment banking.

    United previously announced that the company received proposals from four leading financial institutions for all-debt exit financing. Exit financing will be used by United to repay the Debtor-In-Possession (DIP) facility, to make other payments required upon exit from bankruptcy, and to ensure strong cash balances to conduct post-reorganization operations.

    Jake Brace, executive vice president and chief financial officer. "United is a far different company coming out of bankruptcy than it was going in. Our demonstrated ability to restructure resulted in four major banks competing vigorously to provide exit financing."

    United's commitment letter will be submitted to the U.S. Bankruptcy Court for approval on Oct. 7 for consideration at the Oct. 21 Omnibus Hearing.


    About LIBOR:
    http://www.bankrate.com/brm/ratewatch/other-indices.asp
    1 month LIBOR rate: 3.890
    3 month LIBOR rate: 4.090
    6 month LIBOR rate: 4.530
    1 year LIBOR rate: 4.440
    Assuming the 1 year rate is used UA will pay an interest of 4.440 + 0.450 = 4.890%

    This seems rather a large rate, but that is of course to be expected from an airline that is in as deep financial difficulties as UA.

    Also, I realise that a lot of the article is just the usual spin. But a bank saying: "United has highly attractive assets and a tested, successful management team. The company has proven its ability to navigate through difficult and volatile circumstances while continuing to improve its operations and financial performance." Goes rather far. A lot of the assets are leased and if their management team where indeed succesful UA would not have been in C11 for years!

    Still, if this will safe UA I am all in favour. But it would be nice if there where some comprehensive bankruptcy reforms to prevent other companies from milking it to death.
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