UAL seeks more time to locate lenders

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UAL seeks more time to locate lenders
By Marilyn Adams, USA TODAY

UAL is asking a bankruptcy judge to give its bankers more time to find=20
additional lenders to contribute to a $1.2 billion loan package needed to=20
keep the company operating. United Airlines' parent is not in danger of=20
running out of cash soon. People knowledgeable about the company's finances=
=20
say its cash levels are higher than expected. But the delay in completing=20
the loan package almost certainly means UAL will have to pay a higher=20
interest rate or higher fees to obtain the money. The delay comes as United=
=20
executives are scrambling to bring a preliminary business plan before UAL's=
=20
board this week. Some creditors are asking why that has taken so long.=20
United filed for bankruptcy court-protected reorganization Dec. 9 and won=20
tentative approval for $1.5 billion in debtor financing from four lenders:=
=20
J.P. Morgan, Citicorp, CIT Group and Bank One. Those lenders, in turn, are=
=20
seeking to "syndicate" $1.2 billion of the loan, or re-market it in smaller=
=20
amounts to other lenders to spread the risk.

People familiar with the loan process say that despite UAL's substantial=20
loan collateral and cost cutting in recent weeks, too few lenders have=20
committed at the current terms. According to a motion UAL's lawyers filed=20
Thursday in bankruptcy court, the deadline was last week, and UAL's bankers=
=20
want until Feb. 24.Lenders' reluctance doesn't appear to be tied to UAL's=20
recent financial performance. The company recently won temporary pay cuts=20
from employees worth $70 million a month. It's expected to meet or exceed a=
=20
February cash-flow target the lenders are requiring, knowledgeable people=20
say. The loan is backed by collateral valued at more than double the loan=20
amount, including planes, airport gates and landing slots, and United's=20
authorities to serve U.S.-London Heathrow and U.S.-Tokyo routes, these=20
people say.

But a bankruptcy loan that large is unusual, and UAL is seeking it amid the=
=20
airlines' worst slump in history and threats of war with Iraq. "It's still=
=20
touch-and-go for United =97 whether it has a good business plan and will get=
=20
necessary concessions from its unions," says lawyer Jon Schneider, who's=20
worked on other airline bankruptcies. UAL says it's on track. "It's been=20
less than 60 days since we filed (Chapter 11)," says UAL spokesman Jeff=20
Green. "We're on the schedule we set for ourselves." Some in the financial=
=20
community say UAL is taking longer than did US Airways, which is also in=20
Chapter 11, to define what the reorganized company will look like. "United=
=20
has some steep hurdles to get across," says airline analyst Ray Neidl of=20
Blaylock & Partners. "People may be taking a wait-and-see attitude."


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