Looks like the ATSB is looking for an additiona $1 Billion

[UnitedChicago]

Story from the Tribune. During the news black-out it appears that UA and ATSB had a very open dialogue. Seems they are looking for an addition 1 Billion...so one could assume the magic number is $6 billion.
The WSJ detailed the debt deadlines looming:
UAL debt obligations coming due in the fourth quarter.
Due Date Amount
Bank revolving credit facility Nov. 17 $300 mil
Aircraft-backed security Dec. 2 $575 mil
Machinists union back-pay installment Dec. 15 $70 mil
10.67% Series E senior debentures due May 2004 Nov. 1 $19.7 mil
11.21% Series B senior debentures due May 2014 Nov. 1 $20.8 mil
They could possibly squeek by with the $300 mil payment - possibly. Obviously, no way they could for the %575 mil. If there appears to be solid progress by the end of October, UA could hedge its bets that ratification would pass. It would be a one shot process and I would hope all union leadership would express the urgency to members. If one union votes no...immediate ch11. Tribune article below...
Machinists for United go own way
By John Schmeltzer, Tribune staff reporter. Tribune wire services contributed to this report
Published October 10, 2002
Labor solidarity at United Airlines fractured Wednesday when the machinists broke away from a union coalition and began separate talks on a concession package.
The move by the International Association of Machinists and Aerospace Workers came as sources said the federal loan board considering United''s request for a $1.8 billion loan guarantee has asked for another $1 billion in employee concessions.
United''s five major unions last month proposed $5 billion in givebacks, well short of the $9 billion that United has said it needs to qualify for the loan from the Air Transportation Stabilization Board and avert bankruptcy.
The union coalition and United have been negotiating a framework for the concessions during the past two weeks but had kept a virtual news blackout on any progress.
In a statement, United confirmed that it began independent talks with the machinists union Wednesday.
We plan to enter into bilateral negotiations with each of the coalition members, as we have always expected to do, the company said.
A machinists union spokesman described independent talks with the airline as the most expeditious and efficient way to get the process done. Nevertheless, the union, which represents more than 35,000 United ground workers, will continue to communicate with other unions, the spokesman said.
Other unions discounted the impact of the machinists action. A spokesman for the Air Line Pilots Association said there is a broad consensus among the unions on an overall framework for an [economic] recovery plan.
T.J. Sesko, a spokesman for United''s flight attendant union, said the coalition of unions remains intact.
We continue to work together to avoid a bankruptcy filing, Sesko said.
Whether that will be possible likely remains up to the Air Transportation Stabilization Board. Sources said the board is pressuring United to come up with another $1 billion in cuts from its employees as a condition for the loan.
United lost $2.1 billion last year and is expected to lost more than $2 billion this year.
Time could become UAL''s largest enemy.
UAL is facing a $300 million loan payment to banks Nov. 17 and must come up with another $575 million for loans due Dec. 2.
Paul Whiteford, chairman of the United pilots union, in a letter e-mailed to members last week, said the airline is at crunch time.
Time is of the essence. We are not under any artificial deadlines or any company, ATSB or [union]-imposed deadlines. We are under a practical deadline, one which cannot be postponed, delayed or set aside, Whiteford said. Quite simply, United must have a substantial loan in place prior to mid-November.

 

[Busdrvr]

[blockquote]
----------------
On 10/10/2002 3:33:36 PM UnitedChicago wrote:

The WSJ detailed the debt deadlines looming:

UAL debt obligations coming due in the fourth quarter.
Due Date Amount
Bank revolving credit facility Nov. 17 $300 mil
Aircraft-backed security Dec. 2 $575 mil
Machinists union back-pay installment Dec. 15 $70 mil
10.67% Series E senior debentures due May 2004 Nov. 1 $19.7 mil
11.21% Series B senior debentures due May 2014 Nov. 1 $20.8 mil
----------------
[/blockquote]

Just my view, but here's the way I see the payments falling out. Bank revolving (300 mill)? One way or another will NOT be paid. UAL will likely offer the deal of extend it or we'll default. Does anybody know what assets (if any)back this loan? AB security (575 mil). Will be paid if it has to be, but they will attempt to role it over also. Mech back pay? Will either get postponed or forgiven by the IAM as part of the deal Debentures? It was my understanding that UAL had already announced they would postpone payment on some of these notes. Just my opinion

 

[UAL777flyer]

The only problem is that if UA tells the bank to extend it our we'll default in regards to the first debt payment of $300 million, the bank could call our bluff, at which point, if I'm not mistaken, once we default a 15-day period would go by where we could still make payment. If we didn't, the bank could then involuntarily force us into bankruptcy. Not 100% sure if I'm correct on that one, but I believe I am.

My opinion is that if UA doesn't have the necessary deals in place from all work groups by the end of October, they are best suited to file for Ch.11. If UA manages to prolong the debt payments, what incentive is there then for the unions to agree to concessions? The company wouldn't have much leverage and would have a tougher time fixing the problems that need fixing if we're to survive and prosper.

So I think UA would be foolish to pay for any of these debt payments. They're better of filing for court protection before doing that. War with Iraq looks more likely with each passing day. That would eat up a ton of cash in a HUGE hurry. Too risky to do that in my opinion. Cash preservation is vital at this point. So, give the unions another few weeks to hammer out agreements, at which point you tell them that unfortunately time has run out and we must take action to protect our interests. There has been PLENTY of time. We've known about these problems for months. We've wasted away the last year doing NOTHING substantial to fix this company. If agreements aren't reached in the next few weeks, the company should file for Ch.11 and then petition the court to throw out the labor contracts.

 

[sfb]

What's unclear to me about the additional $1 billion is whether it is over the 5-year period envisioned by the unions or is simply a tack-on extending that period to the company's proposed 6-year period. In the former case, concessions average out to $1.2 billion/year (compared to the company's proposal of $1.5 billion/year), while they stay at $1 billion/year in the latter case.

Defaulting on something like a bank credit facility isn't a terribly good idea; that sort of thing gets your vendors worried and they start demanding cash up-front for things like jet fuel, parts, or catering -- especially considering that they'd be in line with all the other creditors including the bank left holding the bag.

The only things which are clear is that time is getting short now and the revenue picture just keeps getting worse.

 

[DCT JVL]

Interesting thing is, 6 billion is still way better than the original 9 billion (which was a severe reach on the part of the company, by the way. Had they come in with a more reasonable number, they would have been able to avoid the union coalition to begin with). No doubt the unions would have jumped on the chance to make that happen, IF the IAM hadn't bailed out. Obviously, the IAM knows that to get 6 billion, they'd have to take a pay cut.

Of course,this all may still may happen. I hope it does. Spread out fairly and evenly, we can make 6 bil work.

 

[DCT JVL]

This made me think of something else. Just because the IAM bailed doesn't mean the rest of the unions can't still adhere to a framework that would lead to their representative portion of the 6 billion. The rest of the coalition should come back and tell the company that they are still willing to deal. That would immediately put the heat on the IAM, especially in the press. They would be pariahs, without even the support of their own union brethren. It would also leave a nice framed out hole in the paycut jigsaw puzzle that the IAM would have no choice but to fill.

 

[UnitedChicago]

Guys guys. Look...I don't know how UA management could get more leverage against labor at this point. If they roll back the November debt...it's not like the unions are going to say...well the urgency is not there anymore. We're talking weeks - if not days.

Sure the bank could force a filing...but in this economic climate...it is in their best interest to make a deal. If you follow any CH11 filing in the past 1-2 years...almost every company defaulted prior to filing with the hope that they could still reach agreements with labor (US Air) or line up new financing (K-Mart). Neither instance resulted in a forced filing. If this was circa 1997...forget about it. But look at the economic condition that we're in and I bet lendors are at least willing to talk.

DCTJVL:
In terms of $5 billion vs. $6 billion vs. $9 billion...do you really think either party would put their best deal forward from the start? It was in management's best interest to high ball and labor's to low ball. If anyone thinks either party would have made an offer that the other would have immediately embraced...hasn't taken a business course.

 

[UAL777flyer]

UA would be foolish to pay any of the debt. Cash is absolutely vital right now, especially if we go to war with Iraq. No way should UA pay any of the debt payments until they obtain ATSB loan guarantees. So if there are no concession deals in place by the end of October, I think it's then in the company's best interests to file for Ch.11.

 

[UnitedChicago]

Well...there is so much negotiation left. This is a horse race...it's not as black and white of filing ch11 or not. Much is left to discuss...yeah i know not much time is left...blah blah blah

 

[gatemech]

Just wondering what the cash balance is at this time. Has it dropped below the 2.7 billion I last heard about? It must be lower by now.

I was just wondering. Not trying to take this anywhere.

 

[UAL777flyer]

You can bet that it's lower than the $2.6 Billion cash on hand that we had at the end of the 2nd Qtr.

 

[chipmunn]

[P][FONT face=Times New Roman size=3]Reports inidcate UAL has prepared a formal bankuptcy petition with the help of law firm Kirkland & Ellis, investment-banking concern Rothschild North America, and restructuring consultants McKenzie Consulting. Moreover, I understand the ATSB has the governance issue in its cross hairs. Unless something changes, no governance relief, no federal loan guarantee. [BR][BR][/FONT][FONT face=Times New Roman size=3]UAL MEC Chairman Paul Whiteford, chairman of the United pilots union, in a letter e-mailed to members last week, said the airline is at crunch time. [BR][BR][STRONG]Time is of the essence[/STRONG]. We are not under any artificial deadlines or any company, ATSB or [UNION]-imposed deadlines. We are under a [STRONG]practical deadline[/STRONG], one which cannot be postponed, delayed or set aside, Whiteford said. Quite simply, United must have a substantial loan in place [STRONG]prior to[/STRONG] mid-November.[BR][BR]UAL's fourth quarter debt payment are: [BR][BR][/FONT][FONT face=Times New Roman size=3]May 2004 10.67% Series E senior debentures November 1 $19.7 million [BR]May 2014 11.21% Series B senior debentures November 1 $20.8 million [BR]Bank revolving credit facility November 17 $300 million [BR]Aircraft-backed security December 2 $575 million [BR]Machinists union back-pay installment December 15 $70 million [BR][BR]Total 4th quarter one-time debt aymennts $985.5million[BR][BR][/FONT][FONT face=Times New Roman][FONT size=3][SPAN class=BodyFont]The third quarter First Call Consensus EPS estimate is for a -$6.61, which would be a net loss of $376, but some analysts believe the company could report a larger loss closer to $500 million, primarily due to the significant September revenue falloff. The earnings release date is November 11.[BR][BR]The daily fourth quarter cash burn rate could be about $7 million per day or about $642 million for the quarter. UA has has $985.5 million in fourth quarter debt payments and a first quarter 2003 loan payment of $400 million. [BR][BR]The total estimated operating loss and debt payments from July 1 to December 31 could be $2.004 billion.[/SPAN][BR][BR]Enron, WorldCom, & US Airways filed their bankruptcy petition on a Sunday; therefore, some sources believe a UAL bankruptcy filing could come as early as Sunday, October 13. If this does not occur, the next likely dates are October 20 or 27.[/FONT][/FONT][/P]
[P][FONT face=Times New Roman][FONT size=3]Chip[BR][/P][/FONT][/FONT]