The Year of Mammoth Exit Financings?

Pacific Gas and Electric, Adelphia Communications, and United Airlines look to turn things around.
Stephen TaubMarch 23, 2004

The early part of this millennium was marked by a rise in bankruptcy filings and large debtor-in-possession financings. As companies continue to emerge from bankruptcy, 2004 is shaping up to be the year of mammoth exit financings, points out

Earlier this month Pacific Gas and Electric Co. announced that it hoped to emerge from bankruptcy in April with a whopping $9.6 billion in exit financing. This would be the largest such package in U.S. history, easily topping Kmart’s $2 billion last year.

PG&E is expected to fetch $2.9 billion from a bank group led by Citicorp North America Inc. and Banc One Capital Markets Inc., reported the web site. The remaining $6.7 billion figures to come from the sale of first-mortgage bonds.

Meanwhile, Adelphia Communications Corp. announced that it hopes to emerge from its bankruptcy with $8.8 billion in financing. Four banks — Citigroup Inc., Credit Suisse First Boston, Deutsche Bank AG, and J.P. Morgan Chase & Co. — are expected to share equally in the commitment.

Adelphia is also expected to head for the public bond market; $3.3 billion of its exit financing will come from a bridge loan that would need to be repaid fairly quickly.

Meanwhile, United Airlines had hoped to emerge from bankruptcy as early as June, partly on the strength of $2 billion in exit financing from J.P. Morgan Chase and Citigroup. The airline recently announced that this timetable has been delayed until it can work out a couple of major issues with the U.S. government.

According to the Associated Press, the airline’s exit-financing package hinges on the approval of $1.6 billion in federal loan guarantees. United is also hoping for Congress to provide airlines with pension relief; according to published reports, a current bill would allow airlines to delay pension payments for two years.