Ailing United reviews options, bankruptcy financing; stock in free fall
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United Airlines scrambled to chart a course through its financial emergency Thursday as its stock went into a free-fall on expectations of a bankruptcy filing, an action its CEO insisted is not a foregone conclusion. A day after losing its bid for government assistance, United executives met with union leaders, consulted with a key airline ally overseas and tried to shore-up the financing it would need to keep flying in bankruptcy. Shares in parent UAL Corp. lost two thirds of their value in response to the Air Transportation Stabilization Board’s decision late Wednesday not to provide an $1.8 billion loan guarantee. Trading in the stock was halted for the session’s first four hours Thursday, while the New York Stock Exchange reviewed UAL’s qualifications to continue being listed. In heavy afternoon trading, shares plunged $2.12, or 68 percent, to $1 – the lowest level in decades. Standard & Poor’s further downgraded United’s corporate credit ratings following the “disappearance of any realistic possibility” of paying off deferred debt and avoiding bankruptcy. United, which has about $1 billion in cash, has $920 million in overdue debt obligations. “The ATSB’s decision will almost certainly lead to a Chapter 11 bankruptcy filing by UAL and United as soon as United has completed arrangements” to fund operations while in bankruptcy, S&P credit analyst Philip Baggaley said – an opinion echoed by many others. Chief executive Glenn Tilton, following a meeting with leaders of the pilots’ union that holds the largest single stake in the airline, declined to say whether United will file for bankruptcy but said it is not inevitable. “What we have said is we’re going to consider all of our options and nothing really is a foregone conclusion,” he told Chicago’s WLS-TV. He also tried to calm passenger worries, saying the company is “going to be much better for this experience – absolutely no doubt about it.” The carrier continued negotiations Thursday to secure a $1.5 billion loan in the event that it files for bankruptcy, sources familiar with the matter said. The so-called debtor-in-possession financing would allow United to continue operations while restructuring under bankruptcy-court protection. The lead lenders involved in the negotiations are J.P. Morgan, Citigroup, Bank One and GE Capital, a unit of General Electric, according to the sources, who spoke on condition of anonymity. The ATSB ruling left open the possibility United could seek loan assistance later by presenting an improved business plan. Industry experts said there’s seemingly no chance anything could be secured immediately, which United needs to avert bankruptcy. “I can’t imagine them avoiding it unless someone writes them a check for $2 billion,” said analyst Ray Neidl of Blaylock and Partners. Germany’s Lufthansa, which along with United belongs to the 14-member Star Alliance of airlines, said it was in talks about offering assistance to its embattled partner. But it’s improbable that Europe’s No. 2 carrier could pitch in enough to help United dodge bankruptcy. If United does file for Chapter 11, its shares would become almost worthless and a bankruptcy court judge overseeing its overhaul could order far steeper cuts than the carrier has proposed. Analysts say United’s planned 6 percent reduction in capacity next year may be doubled and thousands of additional layoffs are likely from United’s work force of 83,000, already down from around 100,000 since the Sept. 11 attacks. Because of the stock plunge, Dow Jones & Co. removed UAL from the Dow Jones Transportation Average and replaced it with United Parcel Service Inc. |