August 28, 2005

United Airlines seeks the support of Hedge Funds and Private Equity Funds to stay afloat

United Airlines U.S. No. 2 airline has been through Chapter 11 protection for more than three years. The top four lenders have been quite reluctant on extending their financing to the cash strapped airline on account of rising fuel costs and the conflict between the labor and the management. United had even hinted that it would receive $2 billion in financing when it emerges from bankruptcy. The current loan term expires on September 1, which is 10th such grace period granted by the creditors. United had finalized its business plan in July this year and would file its reorganization plan in early September. However creditors can respond to its acceptance until early January next year. So to save its skin United Airlines is exploring wider avenues to seek financing from relatively new and unconventional players like in this market like the hedge funds or private equity firms as an effort to emerge out of bankruptcy. These players have bail out distressed airlines out of bankruptcy, like Cerberus Capital Management LP took a stake in Air Canada to help the company emerge from bankruptcy., whereas, Texas Pacific Group had bought a stake in America West in 1994 when that carrier was in Chapter 11 and helped it emerge from bankruptcy. Chicago Business Reports:

Private-equity firms and hedge funds are increasingly attractive options for United as rising fuel costs and labor turbulence heighten traditional lenders’ wariness of extending large loans to airlines, the source says. Obtaining equity financing would likely be cheaper for United, and tapping such funds wouldn’t add to the airline’s already heavy debt burden. However, the firms would demand an ownership stake, giving them a say in the carrier’s operations.

Read More: United eyeing hedge funds, private equity

--
Did you enjoy this post?

August 28, 2005 in Gossip & Scandal, Regulation | Permalink




Comments

Post a comment






« Bayou Fund bites the dust | Main | Pension Funds succumb to the allure of Hedge Funds »