Experts warn United has high liquidation risk NEW YORK (Reuters) =97 United Airlines officials maintain there is a good=20 chance the struggling No. 2 airline can avoid liquidation, a fate that has= =20 befallen dozens of rivals. But some experts aren't so sure. United parent=20 UAL, which is struggling to cut a high cost structure amid a major slowdown= =20 in the airline industry, filed for Chapter 11 bankruptcy protection on Dec.= =20 9 after losing more than $2 billion over the last five quarters. While=20 United officials say they aim to emerge from Chapter 11 after a wrenching=20 period of cost-cutting and tough union negotiations in the coming year or=20 more, others are not so sure. "I think there is 70% chance these guys will= =20 go into liquidation," said one former senior executive for a major airline= =20 that previously hit turbulence. "The risk is that the employees don't=20 believe it." "Eastern mechanics decided not to settle and drove the company= =20 into Chapter 7 (liquidation)," said this executive, referring to Eastern=20 Airlines, which filed for Chapter 11 in 1989 and liquidated in 1991. "In=20 some ways, you need a surgeon and I think they are maybe out of their= league." Prior to its bankruptcy filing, United arranged so-called=20 debtor-in-possession financing of $1.5 billion with a consortium of banks.= =20 But the company has access to only $800 million of that before it has to=20 show it has met certain cost reductions and earnings targets. It said in=20 court filings it expects to lose at least $20 million a day in December and= =20 more in January, meaning it has to execute extreme measures in the next two= =20 months or the banks could foreclose on the DIP loans. "A default would=20 allow the lenders to foreclose on the collateral, which in turn would=20 likely spell the end for United," said UAL attorney Jamie Sprayregen in=20 court papers. Sources said UAL officials rejected at least two overtures by= =20 private equity firms in recent weeks. One buyout executive said he told UAL= =20 officials he could have raised up to $1.5 billion in funding for the=20 airline, but the offer was rejected. A UAL spokesman declined to comment on= =20 any buyout company interest. The airline instead pursued a $1.8 billion=20 federal loan guarantee, a plan the Air Transportation Stabilization Board=20 rejected, prompting the company to seek bankruptcy protection. Lynn LoPucki, bankruptcy professor at UCLA School of Law, said the airline= =20 did not heed the warnings of the ATSB, which for months had indicated it=20 was leaning against approving a loan guarantee. UAL, he said, accepted=20 union agreements in recent weeks that it knew were not going to pass muster= =20 with the government. Buyout executives say that. if the company achieves severe cost reductions= =20 in coming months, they could step in and bail the company out. That would=20 mean employees, creditors and management would play a subordinate role. "We= =20 think under the right circumstances, we could take a stake that would give= =20 us control," said one buyout executive, who asked to remain anonymous. "But= =20 management or the creditors have to let you in. So far, that hasn't=20 happened." One bankruptcy lawyer previously involved in major airline=20 bankruptcies said United could survive, but only if it won stringent and=20 permanent changes in wages, work rules and pension concessions. But so far,= =20 he said unions seem to be in "denial." "It's always a game of chicken=20 between labor and management," said this lawyer. "But the evidence is out=20 there in Pan Am, Braniff and Eastern (all failed airlines). "There are=20 enough pictures of passengers stranded at airports that it would be hard to= =20 believe that the unions don't recognize that (liquidation) is a=20 possibility," said this lawyer, who asked for anonymity because his law=20 firm may become involved the UAL case. "Everyone should take it seriously." The owner of Roger's Trinbago Site: Roj (Roger James) *************************************************** escape email mailto:ejames@escape.ca Trinbago site: http://www.tntisland.com CBC Website http://www.tntisland.com/caribbeanbrassconnection/ The Trinbago Site of the Week: (TnT News) http://www.tntmirror.com/ (TnT News) courtesy of Roj Trinbago Website & TnT Web Directory Roj's Trinbago Website: http://www.tntisland.com TnT Web Directory: http://search.co.tt *********************************************************