UAL reorganization plan confirmed; United expects to emerge from Chapter 11 in early February

By Caroline Salls

Pittsburgh, Jan. 20 - UAL Corp.'s plan of reorganization was confirmed Friday by the U.S. Bankruptcy Court for the Northern District of Illinois, setting the stage for United to emerge from Chapter 11 in early February, according to a company news release.

The official committee of unsecured creditors withdrew all of its objections to the plan.

"The confirmation of our plan validates more than three years of work to make United a sustainable enterprise, ready to compete successfully with the strongest carriers," president, chairman and chief executive officer Glenn Tilton said in the release.

"Throughout this process, we worked with our stakeholders to consensually resolve issues and put forward a reorganization plan that maximizes the value of United for all, and that provides a solid foundation on which United can compete," vice president and chief financial officer Jake Brace said in the release.

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.

Plan creditor treatment

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.

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

The company said creditor distributions would likely begin shortly after its emergence.

As previously announced, United has secured $3 billion in exit financing from JPMorgan, Citigroup and GE Capital, which will be used to repay the company's debtor-in-possession facility, to make other payments required upon exit from bankruptcy and to ensure strong cash balances to conduct post-reorganization operations.

According to the release, both Standard & Poor's and Moody's Investors Service have given United's business better ratings than any other network carrier.

UAL, the Chicago-based parent of United Airlines, 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.