United Airlines Plan Ok'd By Its Creditors
Source: Lynne Marek
Author: Bloomberg News
United Airlines creditors approved the carrier's plan to repay debt after three years under Chapter 11 protection, paving the way for the company to emerge from bankruptcy in February.
A "sufficient" number of creditor votes were cast in favor of the plan, the Elk Grove Township-based airline said in an e-mailed statement Friday, the court-ordered deadline for results to be announced.
The results allow UAL Corp., the parent of United Airlines, to seek approval of the reorganization plan from U.S. Bankruptcy Judge Eugene Wed off in Chicago. Wed off will consider the proposal on Jan. 18.
United proposes to pay unsecured creditors from 4 cents to 8 cents on the dollar with newly issued shares of stock once the company emerges from bankruptcy. Current stockholders would get nothing, and their shares would be worthless.
Most categories of creditors voted more than 90 percent in favor of the proposal, with one group of unsecured aircraft creditors backing the plan by 64 percent. Companies in bankruptcy proceedings must secure approval from a majority of creditors in each category for a plan to pass and be reviewed by the judge for approval.
"Creditors are so eager to get it over that they would have voted for the plan if UAL were offering a ham sandwich," said Bill Rochelle, a lawyer for some of Unity's unsecured aircraft creditors. "After three years, there is an enormous amount of fatigue that sets in."
The committee that represents the unsecured creditors, which includes the airline's major unions, Airbus SASS and Goodrich Corp., is protesting a provision in the plan to give Unity's top 400 executives and directors as much as $285 million in new stock. The shares are expected to represent 15 percent ownership in the new company.
The company received 55 objections to the plan in total and has been working with creditors to resolve the issues.
The airline's pilots union in December called the stock provision "excessive and extravagant," adding its objections to those lodged by the airline's flight attendants, the machinists union and creditors committee.
United sought bankruptcy protection in December 2002 after it failed to get a U.S. government guarantee for new financing. The company has curtailed losses since then by cutting $3.85 billion annually in worker pay and benefits, terminating employee pensions to save $645 million a year and renegotiating plane leases and scrapping some aircraft to cut $850 million annually.
The committee also has objected in court filings to a proposal in the plan to give a $56 million note to non-union salaried and management employees and to the proposed makeup of the company's board after exit.
Calls to Fruman Jacobson and Carole Neville, lawyers for Unity's creditors committee, weren't immediately returned.
