ATSB Turns Down UAL Request For Loan Guarantees... Again
Well, if this isn't a firm "no," we don't know what is.
The Air Transportation Stabilization Board Monday rejected
United Airlines' latest request for more than $1 billion in loan
guarantees. ATSB Executive Director Michael Kestenbaum said, "The
board will not accept any further submissions from United with
respect to the application."
The ATSB just said no after United went back a third time with
an amended application for $1.1 billion -- about $500 million less
than it originally asked for.
"(The) board concluded that granting the loan guarantee is not a
necessary part of maintaining a safe, efficient, and viable
commercial aviation system in the United States," said an ATSB
letter sent to UAL, United's parent company. "Moreover, the Board
believes that airline credit markets have been improving since late
2001 and 2002... increasing the likelihood of United succeeding
without a loan guarantee."
United's response?
"While we disagree with their
decision, we are gratified by the ATSB's public recognition of our
progress and are already moving forward to secure the exit
financing we need to take United out of bankruptcy," said a
statement issued by the airline. "The message from the ATSB is that
we can get the exit financing we need on our own."
The UAL statement continued: "We are now holding discussions
with our lenders and others to determine what an appropriate
overall capital structure might be. The discussions we are having
will enable us to fill that out, so we can continue moving forward
toward our exit from Chapter 11."
The question now, of course, is what net effect with the ATSB
decision have on United's attempt to close the door on its Chapter
11 bankruptcy. That was supposed to happen by the end of this year.
But on Wall Street, analysts now think it won't happen until next
year -- at the earliest.
Even then, Standard & Poor airline credit analyst Phil
Baggaley told CNN's Money Watch, "They will have to go back and
negotiate with labor, with their creditors, and with the unsecured
creditors. If they attract new equity investors, it will have to
change (the) allocation of ownership each will have."
It's touch and go, said Baggaley.
He's not at sure that UAL can stave off liquidation.
"I think United's chances of raising equity and credit will
depend largely on external events outside their control," he said.
"If there are no major terrorist attacks that affect aviation, or
if fuel doesn't stay extremely high, they probably will be able to
pull together exit financing. But there are risks from those
external factors. I think the clock is ticking."