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Watch the trailer at: http://www.foxsearchlight.com/theclearing/index_nyt.html \----------------------------------------------------------/ United Submits Third Request for Assistance to Loan Board June 23, 2004 By MICHELINE MAYNARD Five days after its last bid was rejected, United Airlines filed a revised application with a federal loan board yesterday, its third attempt to win assistance that would help it emerge from bankruptcy. In a letter to the Air Transportation Stabilization Board, the airline reduced its loan guarantee request to $1.1 billion from the $1.6 billion it had sought until last week, according to someone who saw the revised application. In addition to the loans guaranteed by the government, United pledged to find $500 million from a lender willing to extend credit without a government promise to repay the money if United fails. United also offered to cut its loan term to five years from seven years, the usual length of a guaranteed loan, and promised to keep about $1.5 billion in cash on hand during the term of the loan. It now has about $1.9 billion in cash, but that will fall precipitously by year's end, because it has large pension payments due this fall. United, which has reduced spending by $5 billion a year under bankruptcy protection, estimated it would cut an additional $600 million over the coming two years, but did not provide details of how that would happen, said the person who saw the application. The estimated reductions are less than the $750 million in additional jet fuel costs that United, owned by the UAL Corporation, expects to pay this year. A board spokeswoman confirmed United had sent "new information," but declined to give details. A United spokeswoman, Jean Medina, said the airline would work directly with the board and would not comment more specifically. Even as United sent its revised application, the airline's prospects were dealt a blow. Treasury Secretary John W. Snow turned down an offer by Under Secretary Brian C. Roseboro - one of two board members who voted against United's previous application last Thursday - to resign from the panel, a department official said. Mr. Snow and Mr. Roseboro met yesterday afternoon. The transportation stabilization board's chairman, Edward M. Gramlich, a Federal Reserve governor, also voted no last week. The Transportation Department's representative, Jeffrey N. Shane, abstained. After the vote was announced last week, the Treasury Department and the Transportation Department offered to give United a third chance to revise its application, an opportunity no other airline has received. The Treasury's move followed a call to Mr. Snow from House Speaker J. Dennis Hastert, Republican of Illinois, where United is based. Mr. Snow also received a call from a senior Bush administration official, expressing White House concern over the situation, a Treasury Department official said last week. The Treasury Department played down Mr. Hastert's call, saying that it was normal for members of Congress to voice opinions to cabinet secretaries. But the matter set off a political storm, given Mr. Snow's intervention, Mr. Hastert's political power and the fact that the White House had not previously played a role in any airline's application. Over the weekend, there was speculation that Mr. Snow, whose department includes the loan board, might remove Mr. Roseboro from the board and replace him with someone who would vote in favor of United's next application. On Monday, the Treasury Department came out firmly in support of Mr. Roseboro, saying it had no plans to change its representative to the board. Robert Nichols, a department spokesman, added that the department's representative would decide United's revised application on its merits. United's new bid for a loan guarantee is the second instance of its reducing its request for federal assistance. The airline sought $1.8 billion in loan guarantees when it filed its original application two years ago next week. The air board rejected that application in December 2002, also on a 2-to-0 vote, after which the airline sought Chapter 11 bankruptcy protection. United subsequently reduced its bid last December, when it filed an amended application for $1.6 billion in loan guarantees. The airline had already arranged $2 billion in exit financing from Citibank and J. P. Morgan, including $400 million in financing that would not be secured by federal loans. The revised plan would call for $1.1 billion in secured loans and $900 million in other financing. That is still the most any airline has sought from the loan board. The next-biggest loan guarantee, covering $900 million, was granted to US Airways in 2003; it used the guarantees to emerge from Chapter 11 protection. US Airways, however, technically defaulted on its government assistance this year, and renegotiated the terms. It is threatening to seek another round in Chapter 11, unless its unions provide more wage and benefit concessions, their third round of cutbacks. Industry analysts are skeptical that even an amended request will be successful for United. In rejecting the application last week, the loan board said that United had failed two tests required to be awarded a loan guarantee. The airline had not proved that it was a "necessary part" of the federal aviation system, nor had it shown that it was shut out of the capital markets. Both of those issues are separate from the business case that the airline revised in its latest application. Without a federal loan guarantee, United would be required to find at least $2 billion in financing to move out of bankruptcy; it has been operating in bankruptcy since December 2002. But United does not face an immediate shortage of financing. The airline recently extended its bankruptcy financing through the end of the year, and the reapplication presumably will buy it some time to look for lenders, analysts said. Last week, Mr. Gramlich said any revised proposal would be given to members of the transportation stabilization board 's staff for review and a recommendation to the board. Airlines meet only with the board's staff members, never with the board itself, which does not have any timetable for dealing with applications. It is up to Mr. Gramlich, as chairman, to convene the full board once a staff report is complete. In United's case, there was no word on how long the board's staff members might deliberate. It took them seven months to reach a decision on United's previous application, which the airline filed in December. With that application and with its original bid, United approached some of the board's staff members the night before the votes with new information, only to have its proposals rejected both times. Even as United made one more try, Senator Peter G. Fitzgerald, an Illinois Republican, called for an investigation into the circumstances of last week's vote. Mr. Fitzgerald asked the Treasury Department's acting inspector general to look into whether Mr. Roseboro had faced "inappropriate political pressure or intimidation." Mr. Fitzgerald was the only senator to oppose legislation that created the loan board in 2001. He has consistently criticized United's efforts, even though the airline is based in his state. http://www.nytimes.com/2004/06/23/business/23air.html?ex=1089015042&ei=1&en=d94d7e5e76d31baf --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://homedelivery.nytimes.com/HDS/SubscriptionT1.do?mode=SubscriptionT1&ExternalMediaCode=W24AF 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@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2004 The New York Times Company