"United to miss DIA deadline"

Wednesday, March 26, 2003

United to miss deadline
Airline won't make $9M bond payment due on DIA facilities
By David Kesmodel
The Denver (CO) Rocky Mountain News


United Airlines said Tuesday it won't make a $9 million payment due next
week on $261.4 million in municipal bonds that financed a maintenance hangar
and other facilities at Denver International Airport.

The bankrupt carrier also is seeking a court order to prevent DIA, if it
chooses, to call a default under the lease of those facilities and to try to
repossess them, a United spokesman said.

The Chicago-based airline is taking similar steps at other airports,
including San Francisco's.

"We think it is outrageous that United Airlines has apparently chosen not to
honor its commitment to its special facility bondholders," said Vicki
Braunagel, deputy manager of aviation at DIA.

"Although these bonds are not the obligation of the city of Denver or DIA,
we will review our options to determine what, if any, appropriate actions
are available."

At issue for holders of the DIA bonds - which were 100 percent backed by
United payments on the so-called special facilities lease - is semiannual
interest of $8.986 million due Tuesday.

The interest payment is an unsecured pre-bankruptcy claim United is
prohibited from paying under bankruptcy law, United spokesman Jeff Green
said.

The airline contends the lease agreement is separate from the bond-interest
payments, and failure to make a bond-interest payment does not constitute a
default under the lease, he said.

A hearing on the matter is scheduled Thursday in U.S. Bankruptcy Court in
Chicago.

In addition to a maintenance hangar, the DIA bonds financed a flight
kitchen, a cargo facility, a ground equipment facility and a Concourse B
parts warehouse.

The bonds, issued in 1992, have been trading of about 35 cents on the dollar
in recent days. The principal comes due Oct. 1, 2032.

United has more than $1.5 billion in outstanding special facilities bonds
across the U.S.

Moody's Investors Service rates the DIA bonds "Ca," the second-lowest junk
rating, and Standard & Poor's rates them "CCC-."

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