This article from NYTimes.com has been sent to you by psa188@juno.com. G.E. Unit Agrees to Provide Financing to US Airways January 3, 2003 By EDWARD WONG US Airways and GE Capital have reached a settlement in which GE Capital has agreed to provide additional financing in exchange for a small equity stake in US Airways. The airline and GE Capital, the financial arm of General Electric, have also renegotiated loan repayment terms, aircraft lease rates and terms of engine servicing. The settlement was explained in detail in a filing that US Airways made on Dec. 27 in a bankruptcy court in Alexandria, Va. The agreement is subject to approval by the bankruptcy judge, Stephen S. Mitchell. "Absent the global settlement, the debtors' ability to successfully reorganize would be severely compromised and possibly jeopardized," US Airways said in the court filing. "The debtors believe that such a settlement is fair and reasonable and in the best interests of their estates and creditors." US Airways filed for Chapter 11 bankruptcy protection last August and has been working to bring down its labor, leasing and vendor costs. The settlement provides for GE Capital to supply $120 million while the airline is operating under bankruptcy court protection. That debtor-in-possession financing would be available in monthly installments starting on Jan. 27 and lasting until US Airways finished its restructuring under bankruptcy protection. The agreement would be voided if the airline did not complete its restructuring by July 1, the date that the airline said it planned to emerge from bankruptcy. Once US Airways left bankruptcy, GE Capital would provide $360 million in additional financing. This would be available in monthly installments until Dec. 31, 2008. GE Capital also agreed to lease to US Airways regional jets in which it has an equity stake totaling $350 million. In addition, GE Capital would give US Airways new terms on its lines of credit. In exchange, GE Capital would receive warrants for 3.8 million shares of Class A common stock, the equivalent of 5 percent of the company, as well as 3.8 million shares of Class A preferred stock. The settlement would give US Airways new lease rates on some planes that it leases from GE Capital. Four Boeing 737-300's would have new rates, with monthly payments that expire by December 2007. The filing did not disclose the new rates. US Airways would also have the right to reject two of the four leases as long as the airline paid an agreed amount of unpaid rent. Leases on 10 Boeing 737-200's, 15 737-300's and 11 737-400's would remain intact, and US Airways would take care of any defaults under those leases. But US Airways would have the right to reject two leases on 737-300's if it trimmed its fleet of mainline planes below 260 aircraft. In the filing, US Airways said the agreement with GE Capital reflected "its unique relationship with the debtors and its willingness to finance a significant portion of the capital needs of the debtors after emergence from bankruptcy." GE Capital's financing would come on top of loans and money promised by the Retirement Systems of Alabama. David G. Bronner, the chief executive of that pension fund, agreed to provide $240 million in cash and $500 million in debtor-in-possession financing. In its reorganization plan, US Airways said the pension fund would receive a 36.6 percent stake upon the airline's emergence from bankruptcy and 8 of 15 seats on the board, with 72 percent voting control. The airline's workers would have a 31.2 percent equity stake, and the three largest unions would have one seat each on the board. Another major airline in bankruptcy, United Airlines, a unit of the UAL Corporation, is trying to resolve its own issues. A group of 25 creditors said yesterday that it had formed a committee in response to various debt restructuring proposals by United. The creditors hold bonds, mostly secured by aircraft, known as equipment trust certificates and enhanced equipment trust certificates. The members had come together in October but had delayed announcing the committee's formation because they were waiting to see how United would treat its creditors. The committee said it was encouraging any holders of those bonds to join the group, and it recommended that all holders not accept United's debt restructuring proposals. Members say they represent about $3 billion of an estimated $6.7 billion worth of those certificates at United. David Botter, a lawyer for Akin Gump Strauss Hauer & Feld who represents the committee, said the members thought United was trying to contact some holders of the securities to renegotiate terms that would harm other holders. He said his clients want United to negotiate with committee members collectively. "The information is so scant at this point," Mr. Botter said. "We think it's unusual for any debtor to ignore one of its major creditor constituencies." Mr. Botter declined to name the committee members. Joe Hopkins, a spokesman for United, said the company had no comment. http://www.nytimes.com/2003/01/03/business/03AIR.html?ex=1042613947&ei=1&en=79e908dd38521c4b HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@nytimes.com or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@nytimes.com. Copyright 2002 The New York Times Company