UAL trustees ask court to allow plan vote change after 'discriminatory' settlement with committee

By Caroline Salls

Pittsburgh, Jan. 17 - UAL Corp. trustees U.S. Bank, NA, the Bank of New York and Wells Fargo Bank Northwest, NA requested court approval to allow some voting creditors to change their plan of reorganization votes because of an alleged last minute settlement that would give unsecured creditors a significant recovery from a United agreement with the Pension Benefit Guaranty Corp.

According to the Monday filing with the U.S. Bankruptcy Court for the Northern District of Illinois, "after over two years of intense negotiations with the trustees that resulted in a landmark global settlement that provided significant concessions to [UAL], a last-minute agreement outside of the plan process between the [company] and the official committee of unsecured creditors threatens to scuttle this historic settlement and the plan of reorganization."

The trustees said on the eve of confirmation, UAL and the committee announced an unfair, discriminatory settlement whereby the entire unsecured creditor body, except the trustees and the public debtholders they represent, would receive a significant portion of the consideration flowing from the PBGC settlement.

The trustees said the post-balloting agreement also amends the plan to provide a previously undisclosed, expanded role for the committee on the post-confirmation plan oversight committee.

According to the filing, by settlement and court order, the trustees' and public debtholders' $3.1 billion in claims are to be treated as allowed, general unsecured claims under the plan, and they voted to accept the plan with the understanding that their claims would be treated equally with those of all other general unsecured claimants.

The trustees contended that, by law, the company cannot propose a plan and the court cannot confirm a plan that provides for different treatment for one group of general unsecured creditors.

As previously reported, UAL and the committee reached an agreement Thursday that resolves all of the committee's plan-related issues, including the proposed management equity incentive plan, the amount of the PBGC's claim, stock and note distributions for salaried and management employees and corporate governance matters.

The company said it would file an amended plan of reorganization before Wednesday's plan confirmation hearing.

UAL, the Chicago-based parent of United Airlines, filed for bankruptcy on Dec. 9, 2002. Its Chapter 11 case number is 02-48191.

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