AIRLINES : Dutch Bank Agrees to Help Finance UAL Bid
The unions at United Airlines moved closer to their proposed buyout of parent UAL Corp. on Thursday after a Dutch bank agreed to join four U.S. banks in loaning the employees’ group $350 million each.
The total tentative commitments of $1.75 billion are still short of the $2 billion in bank loans needed to finance a bid of $165 to $175 a share, or $3.6 billion to $3.8 billion.
NMB Postbank Groep N. V. of the Netherlands was the first foreign bank to commit funds to the deal and the first major lending institution to line up behind the four lead banks: Bankers Trust New York Corp., Manufacturers Hanover Corp., Security Pacific Corp. and First Chicago Corp.
A source familiar with the situation said the five banks agreed to make the loan only if they could syndicate, or sell, most of the $2-billion debt to other banks.
By late Thursday, the lead banks hadn’t lined up enough banks willing to participate in the deal, according to a union official.
The unions had hoped to have bank financing in place this week. They face a Tuesday deadline to present a fully financed offer to the UAL board.
UAL stock soared as high as $118 Thursday on the New York Stock Exchange on news of the financing developments but finished down $6.375 at $105.375. Besides the bank financing, the unions are working on obtaining another $1 billion from aircraft and engine makers and from a possible airline partner.
The unions could also turn to Los Angeles billionaire Marvin Davis, who last week offered to contribute $750 million to a joint bid with the unions. Under Davis’ proposal, he would acquire 80% of the firm, and the unions would get 20% in return for wage concessions. In two years, Davis would offer his stake to the unions for a negotiated price.
It isn’t clear whether the unions would team up with Davis. United’s pilots have shown a greater willingness to deal with Davis than the machinists union, whose members include mechanics, ramp workers and baggage handlers.
Davis said he is confident he can finance his offer. And there were indications Thursday that at least some of the banks participating in the offer were willing to finance a joint bid from Davis and the unions.
In April, the UAL board agreed to sell the airline for $201 a share, or $4.4 billion. The unions were forced to lower their price after Iraq’s Aug. 2 invasion of Kuwait--and the soaring fuel prices it triggered--made it impossible to finance that bid.
