UAL Receives $3 Billion in Financing

Bankers bolster United's cash balances, thereby strengthening the airline's post-bankruptcy operations.
Stephen TaubOctober 7, 2005

UAL Corp., parent company of United Airlines, has received $3 billion in exit financing, significantly setting the stage for the embattled airline to emerge from bankruptcy in February 2006. Officials at the carrier, which has been in bankruptcy for nearly three years, said JPMorgan and Citigroup will be joint lead arrangers for the all-debt financing package.

United will use the exit financing to repay its debtor-in-possession facility — as well as make other payments required upon exiting from Chapter 11 — and to ensure strong cash balances to support postbankruptcy operations.

The airline originally expected to receive only $2.5 million, according to The Washington Post, suggesting that Wall Street bankers are interested in airlines as long-term investments. “It obviously adds to our liquidity,” said CFO Jake Brace, according to “In the airline industry, extra liquidity is always a good thing.”

The $3 billion of debt financing comes with a term of six years. The loan’s interest rate is LIBOR (London Interbank Offered Rate) plus 450 basis points and has minimal amortization.

“United has highly attractive assets and a tested, successful management team,” said James B. Lee, vice chairman of JPMorgan Chase, in a statement. “The company has proven its ability to navigate through difficult and volatile circumstances while continuing to improve its operations and financial performance.”

Since filing for Chapter 11 protection in December 2002, United has trimmed more than $7 billion in costs, mostly via jobs cuts and reducing pay, pensions, and benefits, reported the Post.

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