S&P: UAL still on watch

The Air Transportation Stabilization Board late Thursday rejected the application by UAL Corp.'s United Air Lines Inc. unit (both D/--/--) for a $1.6 billion federal loan guarantee. Standard & Poor's said that its ratings on various aircraft-backed debt that have not defaulted remain on CreditWatch with negative implications.

In rejecting the application, the board said that "United's prospects have improved and that the airline credit markets have picked up, making it more likely that United can find a loan without government backing." The board also said that "a majority of the board believes that the likelihood of United succeeding without a loan guarantee is sufficiently high as to make a loan guarantee unnecessary."

However, the Treasury Department, which voted against the application, said that it is "open to reconsideration if United submits an improved application in the coming days," and the Transportation Department, which had voted to defer the decision for one week pending further discussions with United, said that "it stands ready to consider an improved application by United."

The ambiguous outcome leaves United's plans for exiting bankruptcy still uncertain, S&P said.

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