12/16/2002 - Updated 12:53 AM ET United bondholders stand to lose By Chris Woodyard, USA TODAY CHICAGO =97 While major airports appear well positioned to weather United=20 Airlines' bankruptcy reorganization, investors could potentially lose=20 millions on bonds that the airline issued to fund terminals, hangars and=20 other ground facilities."There's definitely a risk to investors," says Jon= =20 Schotz, partner at the investment bank Saybrook Capital. Just how much risk= =20 will become clear as United decides whether to break leases involving=20 airport and maintenance facilities around the country. Schotz says those=20 facilities were financed with upward of $1.8 billion in special tax-exempt= =20 bonds.Fitch Ratings warns of "significant risks" associated with those=20 bonds. But airport officials and some industry experts say it's likely that= =20 other airlines would acquire the leases on any facilities United gave up.=20 That would allow bondholders to recoup most, if not all, of their=20 investments.Bondholders' interests were a sidelight Friday to the unsecured= =20 creditors trying to recover $20 billion after United's decision to file=20 Chapter 11 bankruptcy reorganization last Monday. A committee of 13 creditors was appointed that included United's three=20 major unions, representing pilots, flight attendants and mechanics. It also= =20 included banks, suppliers and aircraft maker Airbus but not Boeing.The=20 several hundred people attending the meeting at a Chicago hotel included=20 attorneys representing bondholders, some of whose investments are backed by= =20 aircraft while others have only United's promise to repay.Other than a 6%=20 flight schedule reduction and a new low-fare subsidiary, United has yet to= =20 signal its major moves. "We are undertaking a transformation of our=20 business," says Jake Brace, chief financial officer at United's parent UAL. The biggest potential impact involves investors at United's hub airports.=20 United's outstanding specialty bonds include:=B7$601 million for Chicago.=20 =B7$225 million for Los Angeles. =B7$216 million for Denver. =B7$188 million= for=20 San Francisco. Tom Walker, Chicago's aviation commissioner, confirms that=20 the only financial risk is for investors, adding that the bonds "are not of= =20 concern" for airport finances.Concerns about United's reorganization have=20 depressed the tax-free bonds sold in Los Angeles and San Francisco so much= =20 that they are trading as low as 20 cents on the dollar, says Zane Mann,=20 publisher of the California Municipal Bond Advisor .Zane says that could=20 turn out to be a huge bargain, because leases on the facilities are so=20 valuable that other airlines will be "standing in line" if United backs=20 out."Continental Airlines has been in bankruptcy protection twice, and=20 ultimately, no one lost a penny," he adds. Continental last emerged from=20 bankruptcy in 1993. 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 *********************************************************