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The Honolulu Advertiser
Posted on: Friday, February 7, 2003

UAL wins more refinancing time, confidentiality

By Marilyn Adams
USA Today

CHICAGO — A bankruptcy judge gave United Airlines' parent company more time yesterday to negotiate cheaper leases and financing deals on hundreds of planes, and let it keep secret the new rates it gets.

UAL's appeal for more time reflects the size and complexity of the giant airline's bankruptcy reorganization effort. UAL's lawyers convinced the judge that negotiating new terms on hundreds of airplanes owned by thousands of parties was logistically impossible by the bankruptcy code's 60-day deadline, which is today.

"Countless thousands" of parties have interests in the planes — "we don't know how many," said UAL lawyer Marc Kieselstein of the Kirkland & Ellis law firm. UAL sent out 2,500 letters when negotiations began, he said.

He told the court that leases on only 154 generally newer planes reflect current values in the airline industry, where the prolonged travel slump and schedule cuts by most airlines have dramatically reduced plane prices. UAL this week will spend $128 million bringing payments current on those 154 jets.

That leaves more than 300 leased and financed planes, more than half UAL's 560-jet fleet, for which it must bring payments up to date or obtain new terms. If it does neither, the planes could be repossessed.

In Chapter 11 since Dec. 9, UAL is seeking to save as much as $500 million a year in aircraft leasing costs by negotiating better rates. Today was the legal deadline for UAL to decide which of its leased and financed planes to keep. UAL was not required to make aircraft rent payments during the 60 days it has been in Chapter 11.

UAL Chief Financial Officer Jake Brace said the airline has reached "understandings" with many parties with claims to the 300 jets.

Brace and UAL's lawyers insisted that their negotiating ability would be destroyed if new lease terms were made public. Lawyers for several big banks that have financed jets argued that UAL had no right to file revised lease agreements with the court under seal.