Source: USA Today
Author: Marilyn Adams

United Airlines resolved simmering disputes Thursday with its unsecured creditors, clearing the way for the carrier to end its 3-year-old bankruptcy case in a few weeks.

The creditors' committee had been preparing for a bitter court fight next week over an executive stock plan and other issues that could have prolonged Chapter 11 bankruptcy for the USA's second-biggest airline.

The new agreement clears the way for court approval of the airline's reorganization plan next week and exit by about Feb. 1.

If U.S. Bankruptcy Court Judge Eugene Wedoff approves the deal, 400 top United executives, including CEO Glenn Tilton, will share an 8% stake in the Chicago-based airline when it is reorganized.

That's down from a 15% stake that management had sought. Creditors rejected that plan as too greedy.

As performance incentives, United executives will receive 10 million shares of restricted stock and stock options that the managers can sell gradually over a period of four years. Although creditors had sought to tie stock awards to performance criteria, that demand was dropped.

The largest single shareholder of the new United will be the Pension Benefit Guaranty Corp., the government insurance agency that took over the carrier's pension plans.

PBGC would get a 20% stake in the company — shares it can later sell. The stake is designed to help the PBGC pay for the $10 billion in underfunded pension-benefit liabilities that the agency inherited when United terminated all four of its employee pension plans in bankruptcy.

Both the company and the committee expressed relief Thursday at the deal. "This lifts a significant obstacle," said Fruman Jacobson, a Chicago lawyer representing the creditors.

United CFO Jake Brace called the agreement "a very important step," although United still faces opposition to the executive stock plan from three labor unions.

Sara Dela Cruz, spokeswoman for United's flight attendants union, said Thursday it objects to executives getting stock bonuses when employees have given up billions of dollars a year in pay and benefits. "It's not consistent with shared sacrifice," she said.

Brace said United is talking to both the New York Stock Exchange and the Nasdaq about relisting United's stock.

Brace said the company plans to issue 115 million shares to the public immediately after exit. United has commitments for up to $3 billion in exit financing from Citigroup, JPMorgan Chase and GE Capital.