United refinances $1 bn in debt

29th Jun 2007

United Airlines, the primary subsidiary of UAL Corporation announced today that it has refinanced approximately $1 billion in existing lease and mortgage debt through the issuance of $694 million in Enhanced Equipment Trust Certificates (EETCs) and $270 million in Special Facility Revenue Refunding Bonds at Denver International Airport. The proceeds from these debt offerings will refinance existing aircraft lease and mortgage debt associated with 13 widebody aircraft and the existing Special Facility Revenue Bonds at Denver International Airport.

Excluding any non-cash gains associated with the extinguishment of debt, these transactions are expected to save United approximately $10 million in interest and rent expense for the remainder of 2007 and $22 million for the full year 2008.

“The market’s reaction to these transactions reflects our solid financial performance and the capital market’s confidence in United,” said Jake Brace, executive vice president and chief financial officer. “Combined with the $1 billion dollar debt pay down in February, United expects to save nearly $100 million in annual financing costs from these transactions.”

Earlier this year, United paid down $972 million of its original $3 billion exit facility, and refinanced the remaining $2 billion. The transaction enabled the company to reduce its financing costs significantly by 175 basis points to 200 basis points over the London Interbank Offered Rate (LIBOR), resulted in less restrictive covenants and released approximately $2.5 billion of collateral.

The lower pricing also set a market benchmark for network carriers and is expected to result in net pre-tax savings of approximately $70 million per annum.



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