UAL Settles Dispute with Creditors' Committee, Thus Clearing the Path to Confirmation

The Unsecured Creditors' Committee in the United Airlines case just filed this pleading announcing that it is withdrawing its objection to confirmation of UAL's plan of reorganization based on an attached 13 page "Term Sheet" setting forth the agreement among the parties. The changes of significance address the following main bones of contention:

  • post-confirmation corporate governance issues, including the structure of the board (12 members, with 2 designated by the union, 5 by the Creditors' Committee, and 5 by the Company), an amendment of the by-laws to include "poison pill" and preferred stock provisions acceptable to the Committee;
  • establishment of a post-confirmation "Plan Oversight Committee," a successor-in-interest to the Creditors' Committee (which will be dissolved on the plan effective date);
  • revisions to the Management Equity Incentive Plan (MEIP): limiting the percentage equity to be issued under the MEIP to 8% of the common shares issued (i.e., 10 million shares, down from 15% posited in the plan); restricting future grants to agreed upon amounts; and staggering the vesting of share grants (with 40% vesting during the first year, and 20% vesting in each of the second, third, and fourth succeeding years);
  • modification and reduction to the "SAM Distributions" provided in the plan to salaried and management (SAM) employees "by the amount that otherwise would have been distributed thereunder to the MEIP participants, who shall not share in the SAM Distribution" (please leave a comment if you can say in plain english how this works);
  • establishment of a post-confirmation "Plan Oversight Committee," a successor-in-interest to the Creditors' Committee (which will be dissolved on the plan effective date); and
  • litigation between the Committee and the PBGC would be settled, resulting in the Committee withdrawing its objection to the PBGC's claim.

Additionally, you'll find the Debtor's Memorandum of Law in support of confirmation here, and the Debtor's Witness and Exhibit Lists here.

UAL also filed this disclosure pursuant to Bankruptcy Code section 1129(a)(5)(B) of the persons that will serve as the officers and directors of the Reorganized Debtors (excluding the parent, UAL Corp. and officers of UAL Corp.). This disclosure also explains in four pages (including a summary chart) the nature and amounts of projected management compensation of the Reorganized Debtors.

Earlier posts on UAL are here, here, and here.

UAL's Plan Summary is a good document to read for an overview of proposed distributions under the plan to creditors (equity gets nothing).

© Steve Jakubowski 2006

Written By:John A. Gurrad On January 13, 2006 9:58 AM

Does UAL plan to issue new stock upon exiting bankruptcy and if so will the current stock be convertible?

Written By:Steve Jakubowski On January 13, 2006 10:13 AM

Take a look at the Plan Summary, which I've just linked to at the end of the above post. UAL common stock interests are "not entitled to receive any distirbution or retain any property under the plan." The summary at p.11 also explains the "exit financing and rights offering." This offering, if it happens, would only be offered to unsecured creditors up to $500 million. So if you own a claim, you might have a right to participate, but you'll have to look at Article VI.J fo the Plan and Article III.C.15 of the Disclosure Statement for a more detailed discussion of such an offering.

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