"UAL Airport Lease Redefinition Could Hurt Muni Mkt - Trade Group"

Friday, August 22, 2003                         

UAL Lease Redefinition Could Hurt Muni Mkt - Trade Group
By STAN ROSENBERG
DOW JONES NEWS


NEW YORK -- United Air Lines' request to redefine its airport leases as
"financing transactions" could hurt the municipal bond market, The Bond
Market Association said Friday.

Changing the nature of bond protection could expose investors to more risk
and set a dangerous precedent, the trade group said in a friend of the court
brief filed jointly with the National Federation of Municipal Analysts in
federal bankruptcy court.

It could also hamper government efforts to maintain a safe and efficient air
transportation system, the two groups maintained.

Bankrupt UAL Corp., parent of United, wants to change the structure of
so-called special facility revenue bonds from being backed by leases on
their facilities. It wants them to be considered loans, or "financings,"
which would qualify them as pre-bankruptcy petition unsecured debt. As such,
the airline wouldn't have to make payments on the bonds since that would be
considered favoring one class of unsecured creditors over others.

"A ruling granting United's motion could undermine a critical government
activity in the essential area of air transportation," said Lynnette Kelly
Hotchkiss, the Bond Market Association's general counsel, in a press
release. "It could greatly inhibit governmental financing of airport
facilities."

The brief says changing or removing protections of the underlying lease
arrangements could expose investors to greater risk.

If the court rules for United, it risks "undercutting the ability of
airports to meet their obligations to investors, as well as to the public to
efficiently finance necessary airport facilities," Hotchkiss said.

The marketplace also would demand greater investment returns, and airport
special facility bonds will no longer be economic or efficient, the trade
group said, rendering one of the most heavily utilized development tools for
the air transportation system nearly unusable.

Chicago-based United last year filed the airline industry's largest
bankruptcy.


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