Pension Benefits Guaranty objects to United Air Lines' DIP amendment

By Jeff Pines

Washington, Aug. 16 - A proposed amendment to the debtor-in-possession financing for UAL Corp., the parent of United Air Lines, violates the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code, the Pension Benefits Guaranty Corp. said in a Friday filing with the U.S. Bankruptcy Court for the Northern District of Illinois.

United has four underfunded pension plans. Federal law requires the airline's parent to make periodic minimum contributions, but the proposed DIP amendment would end those payments. United announced the decision on July 14.

The company is "attempting, through a private agreement, to effect an end-run around federal pension law," the Pension Benefits Guaranty Corp. said in its objection.

The Pension Benefits Guaranty Corp. said the only exceptions to federal law would be if United terminated the pension plans or if the Internal Revenue Service gives the airline a waiver.

"Not a single reported decision has been found in which a court permitted a debtor unilaterally to cease paying statutorily mandated minimum funding contributions prior to termination of the associated plan or receipt of such waiver," the pension insurer said.

United did not make its July pension fund payment. The Pension Benefits Guaranty Corp. estimates United owes more than $182 million in pension fund contributions.

An Aug. 20 hearing is scheduled.

United filed for bankruptcy on Dec. 9, 2002. Its Chapter 11 case number is 02-48191.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.