HSBC files preliminary motion to foreclose on United Air Lines' leases

By Jeff Pines

Washington, June 1 - HSBC Bank USA as indenture trustee filed a preliminary motion to foreclose on leases held by United Air Lines Inc. at San Francisco International Airport.

The goal of the motion is to protect its rights, HSBC said in a filing Friday with the U.S. Bankruptcy Court for the Northern District of Illinois.

UAL Corp., which is in Chapter 11, is the airlines' parent.

In March 2003, United Air Lines filed a lawsuit against HSBC asking the court to declare that the site sublease and facilities leases were not true leases under the bankruptcy code but a financing transaction.

Back in 1997, the California Statewide Communities Development Authority sold bonds to improve the site at San Francisco's airport for the airline, and United guaranteed the repayment of the bonds, it said.

HSBC then filed a claim for $156.5 million on May 9, 2003 and said that it "reserved the right to seek payment of any other amounts based upon, arising from, or relating to" the leases being recharacterized.

United filed for the court to make a final decision without a trial on March 30. HSBC appealed the motion.

HSBC's position is that the leases are leases under the bankruptcy code, but if the leases are not true leases then it wants adequate protection of its interests in the leases and periodic cash payments.

UAL filed for bankruptcy on Dec. 2, 2002. Its Chapter 11 case number is 02-48191.

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