UAL files plan amendments based on unsecured creditors' agreement

By Caroline Salls

Pittsburgh, Jan. 19 - UAL Corp. filed an amended plan of reorganization on Wednesday with the U.S. Bankruptcy Court for the Northern District of Illinois that breaks up the unsecured creditor distribution in order to resolve all of the issues brought forth by the official committee of unsecured creditors.

Among issues resolved were those relating to the proposed management equity incentive plan, the amount of the Pension Benefit Guaranty Corp.'s claim, stock and note distributions for salaried and management employees and corporate governance matters.

Under the plan, the company will issue 125 million shares of new UAL common stock: 115 million shares will be distributed to unsecured creditors, 9.83 million shares will be issued under the Management Equity Incentive Plan and 175,000 shares will be issued under the terms of the Director Equity Incentive Plan.

The company will also issue one share of class pilot MEC junior preferred stock to the Air Line Pilots Association, International, one share of class IAM junior preferred stock to the International Association of Machinists and Aerospace Workers, District 141, and $144.45 million in new UAL ORD settlement bonds for distribution to holders of unsecured Chicago Municipal Bond claims under the Chicago Municipal Bond settlement agreement.

UAL will also issue new UAL convertible employee notes for distribution to the Air Line Pilots Association, International, which will receive $550 million; the Professional Airline Flight Control Association, $400,000; Transport Workers Union of America, $24,000; the AFL-CIO; the Aircraft Mechanics Fraternal Organization, $40 million; International Association of Machinists and Aerospace Workers, $60 million; and U.S.-based salaried and management employees, $56 million.

In addition, the reorganized company will issue new UAL Pension Benefit Guaranty Corp. securities for distribution to the corporation under the Pension Benefit Guaranty Corp. settlement agreement.

Treatment of creditors under the plan will include:

• Holders of debtor-in-possession claims will receive 100% recovery in cash.

• Holders of secured aircraft claims will receive 100% recovery in reinstatement of their claims or return of collateral.

• Holders of other secured claims will receive 100% recovery in cash or the return of collateral.

• Holders of unsecured convenience-class claims will receive 4% to 8% recovery in cash equal to the gross proceeds from the sale of the holders' unsecured distribution share.

• Holders of unsecured retained and unsecured rejected aircraft claims and other secured claims will recover 4% to 8% in their share of the unsecured distribution. Under the old plan, holders of $20 billion to $30 billion in unsecured claims were to receive 4% to 7% recovery in new common stock in the reorganized company.

• Holders of old equity interests, including common stock, preferred stock and 13.25% Trust Originated Preferred Securities will receive no distribution.

The plan will be funded by up to $3 billion in exit financing from JPMorgan Chase Bank, NA and CiticorpUSA, Inc.

To provide additional exit financing, the company said it is exploring a variety of potential rights offerings under which it would offer unsecured creditors the opportunity to purchase about $500 million of new UAL common stock.

A hearing to approve the technical amendments to the plan is scheduled for Friday.

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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