United Airlines parent UAL Corp. remains on course to leave bankruptcy in early February after the company announced the launch of its oversubscribed exit financing loan for up to $3 billion.The six-year loan consists of a $300 million revolving credit facility and an up-to-$2.7 billion term loan, both priced at LIBOR plus 450 basis points. It is secured by "substantially all available assets."

The amount of the term loan is based on 110 aircraft being included in the collateral package, according to Standard & Poor's, which gave a B+ rating to the facility. However, 14 of the aircraft currently are securing an EETC and if United is unable to provide them as collateral then the term loan will be reduced to $2.35 billion. The financing also is secured by international route rights and licenses as well as airport slots and gates. JPMorgan and Citigroup are leading the financing and GE Capital will act as syndication agent.

S&P estimates United will have about $3.1 billion in unrestricted cash when it leaves bankruptcy. This is equivalent to about 21% of the trailing 12 months' revenues, which compares favorably to situations at American and Continental, each of which has cash equivalent to about 16% of the trailing 12 months' revenues.

S&P analyst Philip Baggaley noted that during the bankruptcy process, United reduced its exposure to the US domestic market from about two-thirds of flying to slightly over half, narrowed "somewhat" its cost disadvantage to low-cost carriers and terminated its defined pension plans, thereby relieving it of a $7 billion deficit and reducing its total debt by about one-quarter.

United's labor cost per ASM in 2006 is forecast to be about 42% lower than in 2002, Baggaley estimated, but "because of the sharp increase in fuel prices since late 2004 and the more limited opportunities to lower other expenses in bankruptcy, the decrease in total operating cost per ASM between 2002 and 2006 is expected to be much lower--about 8%."