United Airlines amends DIP to cut rates, extend maturity, change EBITDAR covenant

By Sara Rosenberg

New York, Feb. 18 - United Airlines Inc.'s parent company, UAL Corp., received bankruptcy court approval on the amendment of its $1 billion debtor-in-possession financing facility, reducing the interest rate, extending the maturity to Sept. 30 from June 30 and modifying some covenants, according to a company news release.

Under the amendment, the company repriced its entire $1 billion DIP, comprised of an $800 million term loan and a $200 million revolving credit facility, at Libor plus 450 basis points from Libor plus 500 basis points and removed the 3% Libor floor that was previously in place.

In addition, the January EBITDAR covenant was waived and the minimum monthly EBITDAR targets going forward were adjusted.

The amendment also allows for a potential reduction in the minimum cash balance requirement to $600 million from $750 million if United meets a certain EBITDAR milestone.

After the amendment first launched to lenders in January, there was some concern that the proposal wouldn't pass, with some saying that the company didn't really deserve a price cut and others pointing to problems in UAL being able to reach an agreement with the mechanics union. However, after a few minor tweaks were made (not involving pricing or maturity date), the amendment was approved, a market source explained.

"We are pleased to have amended our DIP financing facility on favorable terms for United and our stakeholders," executive vice president and chief financial officer Jake Brace said in the release. "The willingness of lenders to participate in the amended DIP is reflective of our solid business plan.

"While we still have a number of difficult issues to address, including reaching long-term labor agreements with two of our unions and pension resolution with three of our unions, this amendment will continue our access to the DIP facility while we focus on those efforts and move forward with additional restructuring initiatives in the months ahead," Brace added in the release.

JPMorganChase, Citigroup, CIT and GE Capital are the lead banks on the Elk Grove Township, Ill., airline carrier's DIP.

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