UAL Corporation, the holding company whose primary subsidiary is United
Airlines, today reported it has successfully negotiated an agreement to
amend its debtor-in-possession (DIP) financing credit facilities with its
current lenders, including JPMorganChase, Citigroup, and CIT, and a new
lender, GE Capital. The facilities will provide UAL with an additional $500 million in
available funds, delivering the liquidity necessary to complete UAL’s
successful restructuring. The maturity date is June 30, 2005, giving the
company additional flexibility as it moves to assemble an exit financing
package. The agreement maintains the favorable interest rates and types of
covenants established in the amended DIP agreement of May 2004.

The company will seek bankruptcy court approval of the amended DIP
agreement at the omnibus hearing currently scheduled for August 20, 2004.

“Without the Air Transportation Stabilization Board (ATSB) loan guarantee,
we need to do more restructuring and cost reduction work to formulate a
business plan that will attract the financing necessary to exit Chapter
11. The amended DIP gives us the time and money to do this essential work
in a systematic and measured way,” said Jake Brace, United’s executive
vice president and chief financial officer. “The willingness of lenders to
participate in the amended DIP following the denial of the federal loan
guarantee reflects their confidence in our financial performance and
ability to become more competitive by further improving our cost
structure.”

The amended DIP agreement contains financial covenants that do not permit
the company to make any payments inconsistent with its current financial
projections, effectively prohibiting further pension contributions before
exit, unless the lenders otherwise consent based on a modified business
plan. As a result, the company does not expect to make any pension
contributions before exit because such payments would diminish the
company’s liquidity and reduce flexibility, thus impairing the company’s
ability to attract exit financing. In and of itself, this decision does
not affect the benefits currently being paid under these plans.

By amending the DIP and not making these pension contributions, the
company believes it will have adequate funding until its exit from
bankruptcy. These actions will enhance UAL’s flexibility while it
continues to restructure in a challenging and uncertain marketplace.

In the absence of a federal loan guarantee, United’s long-term business
plan must have cash flow and liquidity levels that the capital markets are
willing to finance. Because existing pension plan contributions will
remain a huge financial burden after exit, it is incumbent on United to
study all possible options and to determine whether United can sustain
this burden and still attract exit financing. At present, no decisions
have been made and much work and analysis needs to be completed. United is
beginning to discuss this situation with its unions and other stakeholders.
——-