UAL Corp., the parent company of United Airlines, has announced that it intends to exit from bankruptcy protection early next year as a “much more competitive company with a solid financial foundation,” according to its press release. Glenn Tilton, UAL Corp.’s chairman, chief executive officer, and president, told employees in a recorded message that the target date for exiting bankruptcy is now Feb. 1, the Associated Press reported. UAL and United and 26 other subsidiaries filed for voluntary Chapter 11 reorganization in December 2002.
“United has made tremendous progress in our restructuring to improve performance across the board, in costs, revenue, operations and service to our customers,” said Tilton. United has reportedly lost over $10 billion since 2000. Bankruptcy restructuring has changed United, providing it with lower costs, long-term labor contracts and a newer fleet of plans, according to AP.
Under the proposed reorganization plan, unsecured creditors may get a chance to buy $500 million of new UAL common stock. When the company exits bankruptcy, its existing shares will be worthless. United expects to issue up to 125 million shares of common stock upon emerging from bankruptcy.
Under the plan, the reorganization would be financed by a $2.5 billion, all-debt loan package. AP reported that the package would be supplied by Citigroup Inc., JPMorgan Chase & Co., General Electric Co., and Deutsche Bank AG.
Investors and creditors are likely to battle for larger payouts. UAL has proposed December 1 as the deadline for objections to the plan and January 17-18 for final hearings to confirm the plan.
“People who assume that this is a done deal are making a mistake,” Bill Brandt, president and CEO of Chicago-based restructuring firm Development Specialists Inc., told the AP. “In many ways, for many of the parties in this case, it’s ‘Game on.’”
Financial institutions have proposed up to $3 billion in exit financing for the Elk Grove Village, Illinois-based company. “The exit financing proposals we have received are a significant vote of confidence in the progress we have made over the course of our restructuring, our business plan and ultimately, United’s future — and in our ability to manage through a complex industry environment, including unpredictable fuel costs,” said UAL CFO Jake Brace.