UAL seeks quick approval of pension plan termination agreement

By Caroline Salls

Pittsburgh, April 27 - UAL Corp. made an emergency motion for approval of its agreement with the Pension Benefit Guaranty Corp. over termination of the company's pension plans, according to a Tuesday filing with the U.S. Bankruptcy Court for the Northern District of Illinois.

UAL Corp. and the PBGC reached a settlement over termination of the pension plans on March 22.

Under the agreement, which must by approved by the bankruptcy court, the pension regulator will terminate UAL's four pension plans and become trustee. The agency's claim against the company would be settled.

According to Tuesday's filing, under the agreement United will be released from more than $990 million in alleged administrative minimum funding contribution claims and almost $800 million in other alleged administrative claims.

In exchange, as part of United's plan of reorganization, PBGC will receive $500 million in 6% senior subordinated notes, $500 million in 8% contingent senior subordinated notes and $500 million in 2% convertible preferred stock.

The PBGC will also be allowed a single pre-bankruptcy unsecured claim against the United Air Lines, Inc. bankruptcy estate from termination of the pension plans.

The four terminated plans are: the UA Pilot Defined Benefit Plan, which covers 14,100 participants and has $2.8 billion in assets to pay $5.7 billion in promised benefits; the United Airlines Ground Employees Retirement Plan, which covers 36,100 participants and has $1.3 billion in assets to pay $4.0 billion in promised benefits; the UA Flight Attendant Defined Benefit Pension Plan, which covers 28,600 participants and has $1.4 billion in assets to pay $3.3 billion in promised benefits; and the Management, Administrative and Public Contact Defined Benefit Pension Plan, which covers 42,700 participants and has $1.5 billion in assets to pay $3.8 billion in promised benefits.

In its emergency motion for approval of the plan, UAL said the plan resolves the "difficult and contentious pension issues that have impeded United's successful reorganization since July 2004."

"And the agreement also results in myriad benefits for United, its estate and its creditors that will substantially advance United's efforts to leave Chapter 11 behind forever," the filing said.

A hearing is scheduled for May 4.

As of Sept. 30, 2004, UAL had a $23.3 billion deficit on its balance sheet, with $39 billion in assets to pay $62.3 billion in guaranteed pension benefits to more than 1 million workers and retirees.

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

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