=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2002/12= /10/BU193944.DTL ---------------------------------------------------------------------- Tuesday, December 10, 2002 (SF Chronicle) United's biggest creditors line up Christian Berthelsen, Chronicle Staff Writer They range from government agencies to faceless bond investors, but they have one thing in common: They are owed a lot of money by United Airlines and might not get all of it back. United's top 20 unsecured creditors are collectively owed more than $3.62 billion. About $3.34 billion comes from bondholders who put up money for the airline's operations and facilities improvements at U.S. airports including San Francisco, Los Angeles, Denver, Miami, New York and Chicago. Unsecured creditors lend money to a company with no collateral and are among the last to get paid when a company reorganizes under the supervision of a bankruptcy judge. The bonds for improvements at San Francisco International and Los Angeles International airports raised more than $472 million. The tax-free bonds were issued in conjunction with the airports and a state agency called the California Statewide Communities Development Authority as a way to obtain a lower interest rate. No government agency was a guarantor on the bonds and taxpayers will not be responsible for their repayment, according to airport and state officials. At SFO, two separate financings totaling $188 million paid for construction of a new boarding area and a flight kitchen, a facility at the airport where in-flight meals are prepared. At LAX, four separate financings totaling $284 million paid for United's share of building a second floor on the airport in advance of the 1984 Olympics, terminal renovations in 1997 and cargo facility construction in 2001. The actual identities of the bondholders were not disclosed Monday in United's bankruptcy filing. A number of banks -- including Bank of New York, Bank One of Chicago, Wells Fargo of San Francisco and US Bank of Minneapolis -- hold them in trust for various clients, who are the real bondholders. Several of the banks declined to identify their clients on Monday, but generally they tend to be institutional investors such as large insurance companies. Bank of New York had the largest share, with more than $1.83 billion in debt securities held in trust. Some of those banks, including Wells, emphasized Monday that they do not have exposure to the large, unsecured bond holdings. But a few financial institutions disclosed on Monday that they face separate financial risks regarding United. The financing company CIT Group of Livingston, N.J., listed about $142 million in exposure to United, including anticipated lease revenue from airplanes and equipment it owns, as well as debt securities collateralized with aircraft. Bank One said it would write off $45 million in loans to United. Both companies are also participants in $1.2 billion "debtor-in-possession" bankruptcy financing for United. The single-largest-known unsecured creditor is a group of government agencies from Indiana, which may be owed $162 million because of a 10-year-old development agreement that hasn't panned out. The state of Indiana, the city of Indianapolis and its airport authority put up $300 million in incentives and grants to United in 1992 and 1994, and United was to locate its primary national maintenance facility for 737s and 757s at the Indianapolis airport. In exchange, United was supposed to invest about $800 million in the facility and employ 6,800 workers, said Richard Nussbaum, the general counsel to the lieutenant governor of Indiana, Joseph E. Kernan. But United has so far not fulfilled its mission on either count, and Kernan said the airline has continued to do most of that work in San Francisco. If United fails to employ the promised number of workers by the end of 2004, it would be liable to the agencies for the $162 million, he said. United may only be employing half the number right now, he said. United declined to comment on any of its unsecured creditors. "This was a major, major economic development project for this area," Kernan said. "We don't want to come off adversarial to United. Our hope is that they would come out of the bankruptcy reorganized and stronger so they can meet their employment goals by end of 2004." ----------------------------------------------- E-mail Christian Berthelsen at cberthelsen@sfchronicle.com. Top 20 large= st unsecured claims against UAL Creditor Nature of claim Amount in millions 1. Bank of New York(x) Unsecured bonds $1,641.2 2. Bank One Trust(x) Unsecured bonds 963.7 3. Wells Fargo(x) Unsecured bonds 379.6 4. Indiana gov't=20 authorities Contract 162.0 5. Bank of New York=20 Midwest Trust Co.(x) Unsecured bonds 161.6 6. US Bank Trust(x) Unsecured bonds 131.9 7. Airbus Aircraft maintenance and parts 47.6 8. Bank of New York=20=09 Western Trust Co.(x) Unsecured bonds 33.2 9. HSBC Bank USA(x) Unsecured bonds 32.4 10. Gate Gourmet Catering 14.4 11. Gaileo International Reservation system fees 12.9 12. Denver Airport Airport rents and fees 12.7 13. San Francisco Airport Airport rents and fees 7.6 14. Atlantic Coast Airlines United Express 4.6 15. Pratt & Whitney Aircraft maintenance 3.9 16. LSG Sky Chefs Catering 3.5 17. Argenbright Security and airport services 3.4 18. AT&T Utility 3.0 19. Metro Wash Airport Auth. Airport rents and fees 2.5 20. Boeing Aircraft maintenance parts 2.4 . (x) Though officially listed as a creditor for filing purposes,=20 the financial institution is acting only as a trustee=20 for unidentified bondholders. . Source: United Airlines Chapter 11 backruptcy petition Chronicle Graphic ---------------------------------------------------------------------- Copyright 2002 SF Chronicle