Fitch: UAL, United unaffected

Fitch Ratings said its ratings on UAL Corp. and United Airlines Inc. are unaffected following the announcement that UAL intends to pay a special cash distribution of $250 million to shareholders while reducing its outstanding term loan balance by $500 million.

The issuer default rating for both UAL and United is B-, and the secured credit facility is rated BB- with a recovery rating of RR1. The outlook for both companies is positive.

The agency said the credit facility amendment and the distribution announcement appear to reflect management's view that a portion of the carrier's unrestricted cash position ($4.2 billion as of Sept. 30) represents excess liquidity that should be allocated to the return of cash to shareholders and the pre-payment of debt.

While this will clearly have a positive near-term effect on leverage, Fitch said, the resulting impact of this action on the carrier's liquidity position and free cash flow generation (after dividends) represents a modest credit negative that could limit United's financial flexibility in a potential industry downturn linked to a softening domestic demand outlook and very high jet fuel prices.

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