Originally Posted by LeeFXDWG

From a business standpoint, the biggest reason to ensure cash on hand is both for the DIP convenants and also to satisfy the reserve requirement for the credit card companies that basically service the airline through the sale of tickets. In the agreements with the card companies, UAUA is bound such that they have to have certain (very large) amount of cash on hand or pay substantial increases for the service. Basically, put the card companies at no risk for the service provided with the requirement for the "restricted" cash in the UA accounts.

Don't have all the numbers, but UA is going to pay some 60 million over 3 years in interest and dividends on the 175 million they get immediate unrestricted access to.......kind of sounds like the financial magic going on with the equity mortgages, "zero" principal refi's, HELOC, etc., mania of a few years back that caused many of the current banking issues????? UA is getting into more creative financing. Prelude to a fall.

One would only have to look into the credit default swaps related to UA's transaction with the bond to get a clearer picture. Yes, the swaps still occur today.......

Also, with regards to the "secured" aspect of the investment bond, perhaps 3dividend payments at best before BK will not make up for the "secured creditor" status when UA goes into BK again. Folks typically have not done well even with the "secured" aspect of aircraft parts. JMHO.

The entities able to take the 250k minimum bet on the bonds for 17.5 interest are rolling the dice big time.

This is a desperation move by UAUA IMO. And, most of wall street is showing their concerns regarding UAUA liquidity as well.....right or wrong, when the street has doubts about you.....perception becomes reality and negative things begin to happen quickly.

It'll be curious to see the 2nd Qtr performance which is usually a strong quarter for UAUA. If bigger than expected losses occur, especially relative to the rest of the industry, I expect the bottom to completely drop out and see a court house visit NLT than March 2010.....in Jan 2010, some large loan servicing comes due and aircraft leases begin to "balloon" negating many of the few gains UA made in BK other than the bottom industry rates of pay for union employees (in relation to other major carriers). BTW, those contracts become ammendable in Jan 2010 as well. Coincidence?

Frats,
Lee (former UAL, 97 hire)