US Partner UA in play...how could this be?

[chipmunn]

[FONT face=times new roman,arial,helvetica size=+1]Endgame in sight for UAL?[/FONT][BR][A href=mailto:[email protected]][FONT color=#000000 size=-1 style=FONT-FAMILY: arial,helvetica; TEXT-DECORATION: none]by Lou Whiteman[/FONT][/A][BR][FONT color=#cc0000 face=arial size=-2]Updated 06:21 PM EST, Nov-6-2002[/FONT][BR]
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[P][FONT face=Times New Roman size=3]CHCAGO (TheDeal.com) - Despite recent developments that could help UAL Corp. avert bankruptcy, airline industry watchers still see plenty of reasons to believe the company is headed for Chapter 11. [/FONT][/P]
[P][FONT face=Times New Roman size=3]The Elk Grove Township, Ill.-based company, parent of United Air Lines Inc., seemingly bought itself some time Tuesday, Nov. 5, when it announced it had reached an agreement with German bank Kreditanstalt für Wiederaufbau to restructure about $500 million in debt due before year's end. Although UAL still has $375 million in additional payments due in early December, the deferrals mean it needs less cash to continue operations, reducing the risk of bankruptcy. [/FONT][BR][BR][FONT face=Times New Roman size=3]UAL chief executive Glenn Tilton said in a statement that the restructuring was a welcome development in our continuing effort to achieve an out-of-court financial recovery. [/FONT][BR][BR][FONT face=Times New Roman size=3]Even with the deferral, UAL has warned that it needs wage concessions from labor to remain viable. It also has made progress in labor talks, agreeing in principle to a deal with its unions that would shave an estimated $1 billion in annual costs. [/FONT][BR][BR][FONT face=Times New Roman size=3]A third ray of hope came Wednesday when Jürgen Weber, CEO of United alliance partner Deutsche Lufthansa AG, told reporters that his company has not ruled out sending cash across the Atlantic to assist its struggling partner. [/FONT][BR][BR][FONT face=Times New Roman size=3]The news has been enough to send UAL stock soaring. UAL shares, which in October traded as low as $1.42, closed Wednesday at $4.45, up 30 cents. [/FONT][BR][BR][FONT face=Times New Roman size=3]Behind the scenes, however, there is considerably less reason for optimism about UAL's prospects. [/FONT][BR][BR][FONT face=Times New Roman size=3]Industry sources say the good news has not stopped an honor roll of private investment groups from considering bids to buy a controlling stake in United on the assumption it will go bankrupt. Those investors are rumored to include [b]Texas Pacific Group[/b] and oil billionaire Marvin Davis, both of which recently submitted bids for bankrupt [b]US Airways Group Inc.[/b], and famed investor George Soros. [/FONT][BR][BR][FONT face=Times New Roman size=3]A spokesman for Texas Pacific declined comment, and representatives for Soros and Davis could not be reached. But an industry consultant who says he was brought in to discuss United with one potential bidder confirmed that discussions are taking place and that there is more than one party reported to be interested. [/FONT][BR][BR][FONT face=Times New Roman size=3]Analysts say there is good reason for skepticism about UAL's hopes of avoiding bankruptcy. The company's remaining $375 million in debt due this year is owned by a consortium of creditors, rather than a single bank, making it nearly impossible to defer payment. And despite reported progress on the labor front, many say UAL and its labor unions remain far from agreement on the scope of concessions needed to win critical government loan guarantees. [/FONT][BR][BR][FONT face=Times New Roman size=3]Jim Higgins, who covers the company for [b]Credit Suisse First Boston[/b], said in a report that he is concerned that labor will view KfW's deferral as a sign that UAL's financial position is not as dire as previously believed, potentially prolonging discussions with labor groups. [/FONT][BR][BR][FONT face=Times New Roman size=3]United is spending $9 million in cash a day and would be left with less than $750 million in the bank after its $375 million payment, Higgins said, making a loan guarantee crucial to sustain operations. [/FONT][BR][BR][FONT face=Times New Roman size=3]Given UAL's limited time frame, our bias remains that UAL will be unable to reach a restructuring plan as required to obtain government-guaranteed loans before being forced into bankruptcy, he said. [/FONT][BR][BR][FONT face=Times New Roman size=3]Others say that the interest of investors such as Texas Pacific and Davis is a sign that the airline may be headed into bankruptcy. Each knows the airline industry well, with Texas Pacific officials participating in the restructuring of [b]America West Airlines[/b] and [b]Continental Airlines Inc.[/b], two of the best-known airline reorganizations of the 1990s. [/FONT][BR][BR][FONT face=Times New Roman size=3]Davis has had less luck, but not for lack of trying. He bid $6.2 billion for United during a previous reorganization in 1989, $2.7 billion for [b]Northwest Airlines Corp.[/b] in 1989 and joined with Lufthansa in 1992 in an attempt to acquire Continental. He fell short in all three attempts, as he did for US Air earlier this year. [/FONT][BR][BR][FONT face=Times New Roman size=3]Industry observers say that if any of these investors are seriously considering a play for UAL, it likely means they believe a Chapter 11 filing is inevitable. [/FONT][BR][BR][FONT face=Times New Roman size=3]There is a real disconnect between the market's interpretation of the news and what these investors seem to be thinking, said one consultant who asked not to be identified. The smart money is always with the billionaires.[/FONT][BR][BR][BR][BR][/P]

 

[Busdrvr]

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On 11/6/2002 11:56:14 PM chipmunn wrote:

Busdrvr:

Apparently, the UAL presentation did not convince the board that the cost cuts and revenue improvements would generate a 7 percent profit margin within seven years. Therefore, more cuts may be necessary to obtain the loan guarantee.

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Apparently?!
How apparent is that? They requested more information on some specific areas. UAL has a lot more issues that have to be considered than a FRNT or ATA (which incidentally is getting a loan with no wage concessions and had HUGE 3rd Q losses, but I digress). We actually HAVE a pension. The ATSB wants more info on funding, and on capital expenditures (we've deferred more A/C deliveries). Might be that they are worried about the lack of revenue we'd get from a liquidated partner....

 

[chipmunn]

Busdrvr:

As I have said before, I think people will be surprised on how things end up at UA.

I understand UAL chief executive officer Glenn Tilton, chief financial officer Jake Brace, senior vice president of finance Doug Hacker, senior vice president of operations Pete McDonald, senior vice president of planning Greg Taylor, and 12 other officers and directors met with the ATSB earlier this week in Washington.

Apparently, the UAL presentation did not convince the board that the cost cuts and revenue improvements would generate a 7 percent profit margin within seven years. Therefore, more cuts may be necessary to obtain the loan guarantee.

In addition, it appears the company will not be able to restructure its $375 million of public debt due on December 2 and has set a November 30 deadline for ratified labor restructuring agreements.

Without consensual accords from labor and aircraft lessors to permit a loan guarantee by November 30, the company appears to have set a deadline for a formal in-court reorganization no later than December 1.

This week's developments buy UA, its employees, and other stakeholders more time to reach consensual accords, and I encourage all parties to do what is necessary to avoid bankruptcy.

Chip

 

[Busdrvr]

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On 11/6/2002 11:22:08 PM chipmunn wrote:

[FONT face="Times New Roman" size=3]Industry observers say that if any of these investors are seriously considering a play for UAL, it likely means they believe a Chapter 11 filing is inevitable. [/FONT]

[FONT face="Times New Roman" size=3]"There is a real disconnect between the market's interpretation of the news and what these investors seem to be thinking," said one consultant who asked not to be identified. "The smart money is always with the billionaires."[/FONT]

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Shouldn't you be studying the differances between RJ-50's and 70's? Billionaire Soros bought UAL stock above ten bucks. Is that the smart money? Marvin Davis has tried and failed at least three other times...Smart money? Catch a clue, of course there are folks lining up in case. there is no guarentee the gov will give a thumbs up to the loan. If there was a 1% chance they wouldn't, then it would STILL be prudent to have a backup plan. I there has been one constant throughout the last year, it's that the ANALyst have been wrong WAY more often than right. You gotta cancel that National Enquirer subscription!!!

 

[767jetz]

Well Chip, didn't take long for you to dig up another expert who wrote a story that supports your gloomy forecast for United. Once again however, it is one person's uninformed opinion and nothing more than speculation.

Did the writer disclose his sources, besides refering to analysts and industry insiders and secret experts?

When are you going to figure it out? You and the analysts you love to quote have been wrong over, and over, and over, and over, and over...

I hope you don't think this thread is getting anyone worried. Your credibility around here is close to non-existent. We're way ahead of you in this game, buddy. Sit back, watch, and learn...

 

[767jetz]

[blockquote]
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On 11/7/2002 1246 AM chipmunn wrote:

There is a strong connection between Siegel, Bronner, Dutta, Bonderman, & Ornstein, all of whom are working together on the US restructuring and have had contact with UA.

Chip


I knew there had to be a conspiracy hiding in there somewhere!









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[chipmunn]

TPG and/or Continental Air - Bid on UAL?

CHICAGO (Tribune) - Even as United Airlines announced Tuesday that a German bank will restructure imminent loan payments, at least three investment groups are working on plans to bid for control of the struggling carrier should it land in bankruptcy court.

Texas financier David Bonderman, California oilman Marvin Davis and billionaire investor George Soros head the three groups expected to bid for United if the Elk Grove Township-based carrier is forced to seek bankruptcy protection, airline officials said. In addition, sources said Houston-based Continental Airlines has been preparing a bid to acquire United in the event of a bankruptcy filing.

Tuesday's $500 million loan deal between United and Frankfurt-based Kreditanstalt fur Wiederaufbau will delay critical payments due over the next 30 days until 2007, easing the financial pressure the airline is facing. United had a $300 million payment due Nov. 17.

Shares of parent UAL Corp. rose 97 cents to close at $4.17 on news of the debt restructuring. Still, the airline continues to lose millions of dollars each day and will have a negative cash flow of $1.2 billion in the fourth quarter.

This doesn't really take the pressure off, said Jake race, executive vice president and chief financial officer of United. It relieves a Nov. 17 deadline.

Additionally, United faces bond payments of $375 million due Dec. 2 and another $400 million due in early 2003.

Although the refinancing could improve United's chances of obtaining $1.8 billion in federal loan guarantees and avoid a trip through bankruptcy court, it is unlikely to stop the plans of the financiers poised to bid for the airline if it files for bankruptcy.

Bonderman provided bankruptcy financing for Continental Airlines and America West Airlines; Davis has teamed with Jonathan Ornstein, the chairman and chief executive of Mesa Air Group; and Soros--who began buying stock in UAL Corp. this year--leads the third group, according to some of those involved in the deals and various industry sources.

A bankruptcy filing would give any of the groups the opportunity to bid for United or provide financing in exchange for a controlling stake in the airline.

It makes a lot of sense to me, said Darryl Jenkins, director of the aviation institute at George Washington University. Getting ready is actually reasonable. One thing for sure is there will be people popping up all over the place wanting to buy United.

Bonderman and the group headed by Davis and Ornstein are familiar with bidding for the remains of shattered airlines.

Both were bidders this year for a 37.5 percent stake in US Airways when it emerges from bankruptcy protection. The Davis/Ornstein group was outbid by Bonderman's group. But Bonderman, co-founder and a partner in Ft. Worth-based Texas Pacific Group, subsequently was trumped by a bid from the Alabama State Pension Fund.

When asked about the groups preparing plans for a bid, Ornstein, contacted in his Phoenix office, said, All you have to do is connect the dots.

 

[chipmunn]

Busdrvr:

Darryl Jenkins was hired by UAL as a consultant on the last UA attempt to merge with US.

Dave Boderman & Dave Siegel are very good friends.

Jonathan Ornstein & Dave Siegel are also good friends and just reached agreement where Mesa will add 20 more 50-seat RJs to US Express. Moreover, the two CEO's could be close to another deal & today US ALPA debated authorizing Ornsteins' 70-seat Freedom Air RJs to fly for US Express.

Ornstein is the largest US shareholder.

Rono Dutta has been retained by UAL & RSA as a consultant.

The Chicago Tribune reported when asked about the groups preparing plans for a bid, Ornstein, contacted in his Phoenix office, said, All you have to do is connect the dots.

Chip comments: Again, I believe you are going to be surprised with how this ends up at UA. There is a strong connection between Siegel, Bronner, Dutta, Bonderman, & Ornstein, all of whom are working together on the US restructuring and have had contact with UA.

Chip

 

[chipmunn]

767jetz:

767jetz said: Well Chip, didn't take long for you to dig up another expert who wrote a story that supports your gloomy forecast for United. Once again however, it is one person's uninformed opinion and nothing more than speculation. Did the writer disclose his sources, besides refering to analysts and industry insiders and secret experts?

Chip comments: 767jetz, the information in the Chicago Tribune and TheDeal.com articles has been known by insiders since early spring (in fact, maybe as early as last fall). Although I disagree with the continual attempts of UA ALPA to bypass ALPA International Merger Policy, I do not wish anything negative to happen to the UA pilots and employees and I hope your company can avoid a formal reorganization.

My comments are not intended to be a gloomy forecast, but what sources have told me on a condition of anonymity. Regardless, a potential UA corporate transaction is now hitting the news media. Will something occur? I do not know, but I guarantee you it's being discussed by powerful and well capitalized people.

But, the issues you have or portray on this board would be better aimed at UA's strategic consultants, bankruptcy representatives, and executives who have worked at both US & UA, both in the present and in the past.

Remember when contacted by the Tribune Ornstein said, All you have to do is connect the dots.

Chip

 

[767jetz]

UAL777flyer,

Do you still think we should give Chip a break? This guy just won't stop!

Kinda like the Energizer Bunny.

 

[GGpillow]

I find it amusing this was posted on the U board as opposed to the UA board. True, Mr Theirisreasontobelieve has taken quite a haircut over there everytime he's posted one of his industry insider reports from msnbc or some newspaper.

Chip, the numbers in that article don't add up. We KNOW we have a lot of problems to work out, but we are working on them, and, as this week has shown, we have made CONSIDERABLE progress. How many times have your industry sources set a timeline for UAL to file, only to have it come and go?

Chip, yes UA employees have been flaming you hardcore, but, you must understand, that, we don't need someone telling us on a daily basis that we have problems. We KNOW that already. We also don't need someone to see a hidden motive in every USAToday press piece.

In short, I can't recall one instance where any of the outlandish things I have seen you predict has come to pass. If you DO have informed industry experts well, to be blunt, you need to find new ones, cuz the ones speaking to you on condition of anonymity don't seem to know which way is up.

 

[iflyjetz]

[blockquote]
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On 11/6/2002 11:56:14 PM chipmunn wrote:

As I have said before, I think people will be surprised on how things end up at UA.
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[/blockquote]

[blockquote]
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On 11/7/2002 1246 AM chipmunn wrote:


Darryl Jenkins was hired by UAL as a consultant on the last UA attempt to merge with US.

Dave Boderman & Dave Siegel are very good friends.

Jonathan Ornstein & Dave Siegel are also good friends and just reached agreement where Mesa will add 20 more 50-seat RJs to US Express. Moreover, the two CEO's could be close to another deal & today US ALPA debated authorizing Ornsteins' 70-seat Freedom Air RJs to fly for US Express.

Ornstein is the largest US shareholder.

Rono Dutta has been retained by UAL & RSA as a consultant.

The Chicago Tribune reported when asked about the groups preparing plans for a bid, Ornstein, contacted in his Phoenix office, said, "All you have to do is connect the dots."

Chip comments: Again, I believe you are going to be surprised with how this ends up at UA. There is a strong connection between Siegel, Bronner, Dutta, Bonderman, & Ornstein, all of whom are working together on the US restructuring and have had contact with UA.

Chip
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[/blockquote]


I gotta agree with you, Chip. It's starting to sound like the big boys are lining up to fragment U, where Ornstein picks up a slimmed down U route structure and becomes an express feeder for UAL.
Siegel needs more capital to purchase some key pieces of U ... gates and slots. Hence he goes to his friend Bonderman for some cash. In the end, UAL gets everything that they wanted when they tried to acquire U.
There. I've connected the dots.
There will be significant political pressure to get UAL the ATSB loan. While you play up the possibility that UAL will get turned down by the ATSB, I don't see that happening. Curiously, the ATSB has now denied U the loan. What is to be made of that? Shrink U down to a small express carrier, sell most of U's assets and return all of U's jets to the lessors. The money to pay for a few RJs for U will come from selling off a ton of gates and slots. All of a sudden, the right seat of an RJ may be out of reach for you, Chip.

I don't know diddlysquat about what will happen, but I'm sure that this scenario is like a Steven King novel to U employees. Chip, your halfbaked theories of UAL's destruction do the same to UAL employees. You have been wrong so many times that I've stopped counting. When was the last time that ANY your 'prognostications' have been correct? While we all speculate on the future of the industry, your posts have a nasty tone to them.

 

[Pacemaker]

Chip, I believe you mean well and are sincere when you say you wish no harm befall anyone. That said, with all due respect I think you need to look at your track record and better discipline yourself when posting these interminable scenarios, which always seem to have sliding deadlines and are constantly being re-worked in the aftermath of their utter failure in materializing.

Example - last spring we first heard of the possible unique corporate transaction. You made sure we understood how imperative it was that US Airways avoided CH. 11 in order to participate in this transaction, whatever it was.

Then US Airways files CH. 11. So much for the U. C. T. But wait, now it becomes inevitable that UAL will also file CH. 11, so the priority for US Airways and it's employees is do anything, agree to anything, to emerge from Ch. 11 first so as to, we are led to believe, participate in picking over the UAL carcass.

But wait...UAL may now dodge the bankruptcy bullet and US Airways seems to be entering a graveyard spiral. So now what? Well it didn't take long for you to pounce on that connect the dots comment, did it?

Chip, you are doing a disservice to thousands of US Airways employees by continuing to preach that if we just do aything Dave asks, we'll end up ruling the airline world.

Better take a close look at National - they had possilby the lowest pay and work rules of any airline out there and where did it get them? They are a perfect example of what happens when, much like US Airways is becoming, you're a bankrupt airline with a weak route-structure and a weak, eroding revenue base.

 

[N628AU]

[blockquote]
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Curiously, the ATSB has now denied U the loan.
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[/blockquote]

I take this as a blast at Chip's writing style, much like my tag line. I have yet to see anywhere besides media reports or Chip's inside sources speaking on the condition of anonymity, that our loan has been denied. In fact, the only public statement from the ATSB came the day after we filed saying it did not affect the application. Sure we still need to meet 7%, but there has been nothing nothing the loan has been denied. If you are being serious, please state your source.

 

[Bear96]

As much as I don't want to see it happen, and as much as I think Chip's writing style is inappropriate, I do hope the UAL employees here are preparing for a post-Ch.11 UAL and the pain that will come with it.

Of course we all want to defend our company right now. I just hope the UAL employees here aren't reacting solely to Chip's proclivity for drivel and spin and so reflexively are defending the opposite point of view from his; but at least privately are considering the possibility of UAL filing Ch.11. To do otherwise is to be out of touch with reality.

As much as I hate to say it, I continue to think UAL will have to file Ch.11 at some point this winter, with a serious shrinking of the company to follow.