UAL sale-leaseback reaps $150 million

[UAL_TECH]

UAL sale-leaseback reaps $150 million

Excerpt:

UAL said it sold 15 Boeing 757 jets to a subsidiary of Wayzata Opportunities Fund II LP for about $150 million. United Airlines will lease the aircraft back and will continue to operate and maintain the planes.

Crain's:

Chicago-based United has raised more than $1.6 billion this year selling or refinancing aircraft and other assets, including frequent-flier miles.

B) xUT

 

[FWAAA]

Very good news for UAL as it has had to deposit over $1 billion of cash with its hedge counterparties recently:

http://biz.yahoo.com/ap/081125/united_hedging.html?.v=3

The article mentions $990 million deposited with counterparties at $51/bbl. With current prices about $10/bbl less than that, expect a couple hundred million more desposited with counterparties.

Same story at AA and other airlines; they've been raising cash like crazy to satisfy cash collateral requirements on their hedges gone bad.

 

[UAL_TECH]

Very good news for UAL as it has had to deposit over $1 billion of cash with its hedge counterparties recently:

http://biz.yahoo.com/ap/081125/united_hedging.html?.v=3

The article mentions $990 million deposited with counterparties at $51/bbl. With current prices about $10/bbl less than that, expect a couple hundred million more desposited with counterparties.

Same story at AA and other airlines; they've been raising cash like crazy to satisfy cash collateral requirements on their hedges gone bad.

Maybe, but at $10 mill a piece, sounds like a fire sale.

1998 BOEING 757-200

Short term gains, long term loss IMHO.

B) xUT

 

[FWAAA]

Maybe, but at $10 mill a piece, sounds like a fire sale.

Hadn't thought about it like that. $10 million for a 757 does sound pretty cheap. Perhaps UA's planes are older and or higher hours/cycles or perhaps UA's financier isn't willing to go more than 33% or 50% LTV.

 

[UAL_TECH]

Hadn't thought about it like that. $10 million for a 757 does sound pretty cheap. Perhaps UA's planes are older and or higher hours/cycles or perhaps UA's financier isn't willing to go more than 33% or 50% LTV.

Most likely, we will never know the details. It just smacks of when UAL bought 747-4XX, created a subsidiary of UAL as a leasing company, sold the planes to the subsidiary and leased them back. I believe, that most of our purchased 747-4XX have been sold (also in a fire sale). All under the umbrella of UAL ‘CORP’.

IIRC, in BK proceedings, most of the subsidiaries were profitable and United Airlines (a subsidiary of UAL Corp) was the biggest looser which caused insolvency. :blink:

Of course there is no direct tie-in, but who knows… 😛h34r:
Tilton may not be satisfied with the ATA position and may be trying to buy a ‘Senate Seat’… 😛

JMHO :wacko:

B) xUT

 

[BoeingBoy]

Hadn't thought about it like that. $10 million for a 757 does sound pretty cheap. Perhaps UA's planes are older and or higher hours/cycles or perhaps UA's financier isn't willing to go more than 33% or 50% LTV.

A 1998 B757 is newer than all but a handful of UA's 757's - there were only 2 delivered in 1998 and 2 more in 1999. Roughly 50% of UA's 757 were delivered in 1991 or earlier.

In addition to age/cycles, the global economic slowdown has undoubtedly had a effect on used airplane prices. It'd be nice to always do these sale/leaseback deals either when the plane is first delivered or used prices are higher, but you can't always pick when you need the added liquidity.

As UAL_tech points out, though, a sale/leaseback yields short term gain (liquidity) at the cost of long term pain (the lease payments total more than the sale price - absent BK as leverage to get the payments down).

Jim

 

[Winglet]

Just burning more furniture.