UAL Stock Continues Fall; Bidders Try to Revive Deal

UAL Corp.’s stock price continued tumbling today as backers of a proposed buyout of the parent of United Airlines worked to revive their stalled plan at a lower price.

UAL stock was down $23.87 1/2 to $199 a share by midday today on the New York Stock Exchange, after plummeting $56.87 1/2 a share on Monday.

A $300-a-share buyout offer by United’s pilots and management collapsed Friday when banks refused to finance the planned $6.75 billion deal, triggering a broad market decline and sending UAL shares plunging.

On Monday, top UAL executives flew to New York, Washington, D.C., and Europe to meet with legal and financial advisers, bankers and lobbying strategists in an attempt to keep the buyout attempt alive.

Citibank, the New York-based bank that is leading a syndicate of lenders involved in the UAL deal, today confirmed reports that it had presented potential Japanese lenders with terms for a revised bid.

“We have expressions of interest from both the borrower and the banks,” said spokeswoman Holly Cherico in New York. “We do not have an agreement...but we are working with both towards coming to a satisfactory resolution with the financing.”

Under the proposed terms, the bid would be lowered to $250 a share, Akira Yokoo, a Citicorp spokesman in Tokyo, said earlier. That would value UAL at about $5.62 billion.

The terms also called for a higher interest rate on the loan and bigger fees for participating banks, he said.

Major Japanese banks, including Dai-ichi Kangyo Bank and Fuji Bank, said they were studying the new proposal. The early reaction to the new proposal was mixed.

“The new offer is much better than the previous one, and our bank will probably be able to work it out positively,” said Toshiaki Fujii of Mitsubishi Trust Bank in Tokyo, which had pledged $300 million under the previous deal.

But other banks said they were still doubtful.

“The fees and the interest rate are improved this time but that’s not enough,’ said Kazunobu Kobayashi of the International Credit Evaluation Department at Sumitomo Bank in Tokyo, which had rejected the earlier proposal.

“The fact that the market is quoting the stock at 75 points below (the value of the bid) shows the market has very, very high doubt as to whether this deal can be consumated,” said Stephen Dexter, an airline industry analyst with Kemper Financial Services Inc.

“It suggests some people don’t think they will be able to restructure the bid,” he said.

Dexter said the UAL situation may be a sign that the whole leveraged buyout wave is coming to an end, but James Lorie, professor of finance at the University of Chicago, disagreed.

“This was just not a good deal,” Lorie said. “Good deals will continue to be financed. I think the banks were pretty candid ... in saying that the revenue projections on which the deal was based were unrealistic.”

Lorie said he couldn’t justify trading UAL stock at $300, because it had been trading at $85 a share before news of the takeover bid surfaced earlier this year. A deal restructured “toward a more realistic” price -- from $220 to $225 a share -- could succeed, he said.