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United close to bankruptcy financing
Bank source says that troubled No. 2 airline could get $1.5B in financing to be used in bankruptcy.
December 5, 2002: 5:41 PM EST

NEW YORK (CNN/Money) - Embattled United Airlines appeared close to wrapping up a source of financing needed to operate during a bankruptcy-court supervised reorganization, according to a source with one of the embattled airline's banks.

The airline was close to $1.5 billion in so-called debtor-in-possession (DIP) financing, the source told CNNfn Thursday evening. DIP financing is often easier to obtain for financially troubled companies because the lenders get paid back before other creditors. United reportedly would be able to use about half of the financing immediately, according to the source.

United parent UAL Corp. (UAL: Research, Estimates) had confirmed last month that it was in negotiations for possible DIP financing due to the risk of bankruptcy.

Bankruptcy became a virtual certainty for the world's No. 2 airline when the federal government turned down its application for $1.8 billion in federal loan guarantees. United faces the end of grace periods next week on $920 million in debt payments that had been due Monday, Dec. 2, and has said it would not be able to make those payments without a loan guarantee, leading most observers to expect a bankruptcy filing by the weekend.

The banking source said banks involved in the financing include J.P. Morgan Chase (JPM: Research, Estimates), Citigroup (C: Research, Estimates), Bank One (ONE: Research, Estimates) and GE Capital, a unit of General Electric (GE: Research, Estimates).  Top of page

Reuters contributed to this report

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