United Air Lines noteholders to receive $75 million under settlement

By Caroline Salls

Pittsburgh, Oct. 13 - Holders of United Air Lines Inc.'s Regional Airports Improvement Corp. adjustable-rate facilities lease refunding revenue bonds will receive a $75 million cash payment in full satisfaction of the bonds under a settlement regarding the value of the collateral securing the bonds, according to a notice to bondholders from trustee UMB Bank, NA.

The trustee said the U.S. Bankruptcy Court for the Northern District of Illinois originally granted a $33.46 million unsecured claim to the bondholders in connection with the collateral valuation.

However, UMB appealed the bankruptcy court's ruling and the U.S. Court of Appeals for the Seventh Circuit ruled that the bondholders were entitled to collect the full value of the bonds, plus interest, meaning that the collateral was worth at least the amount of the principal outstanding on the bonds.

The $75 million settlement payment will consist of $22 million from a disputed escrow fund, a cash payment from the sale of 579,348 United shares and a $49 million payment from the City of Los Angeles' Los Angeles World Airports.

The trustee said it expects 97% of the settlement amount will be available for distribution to bondholders after payment of litigation fees.

A bankruptcy court hearing on approval of the settlement is scheduled for Nov. 10.

UAL, the Chicago-based parent of United Airlines, emerged from bankruptcy in February 2006. Its Chapter 11 case number is 02-48191.

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