Kelley Drye Helps PBGC Reach a Successful Result in the United Airlines Bankruptcy
March 29, 2006
As UAL Corporation, parent of United Airlines, and its affiliates emerged from Chapter 11 bankruptcy proceedings, Kelley Drye client Pension Benefit Guaranty Corporation (“PBGC”), a Federal government agency created to administer the defined benefit pension plan insurance program, was UAL Corporation’s largest unsecured creditor, holding claims arising from the termination of four of United’s defined benefit pension plans.

In exchange for its claims, when UAL’s plan of reorganization became effective, PBGC was entitled to receive approximately $1.5 billion of senior notes, contingent notes and aggregate liquidation value of convertible preferred stock and nearly 20 percent of the outstanding common stock of the reorganized UAL Corporation. When United emerged from bankruptcy, through an introduction arranged by Kelley Drye, Deutsche Bank led a syndicate of funds and institutions which purchased $450 million of PBGC’s unsecured claims, thereby entitling the group to receive approximately 8 percent of the new UAL common stock.

Kelley Drye helped navigate PBGC through several significant hurdles which were seriously jeopardizing PBGC’s position and threatening the viability of United’s reorganization, including playing a key role in resolving issues which persuaded UAL to withdraw its proposal to impose significant transfer restrictions on the stock which PBGC received.