NEW YORK, OCT. 2 -- Employees at United Airlines have made progress in lining up $2 billion of financing for their proposed buyout of the carrier and have given themselves an extra six days to obtain the necessary loans to complete the long-delayed deal, sources said today.
The pledging of $1.4 billion by four key banks is the most positive news in months about the union-led deal, which has dragged on for three years without success. The news helped push up the stock price of UAL Corp., United's parent, nearly $15 per share in two days. It closed today at $112.
But the sources, who are familiar with the transaction, emphasized that the buyout still faced several major hurdles before it could be accomplished and create what would be the nation's largest employee-owned company.
The first key step is the effort by the four lead banks -- Bankers Trust New York Corp., Manufacturers Hanover Corp., Security Pacific Corp. and First Chicago Corp. -- to persuade about 20 other banks to promise to lend $600 million in a loan syndication for the buyout.
"The early reading is that the syndication has a chance to be significantly successful, which means to be oversubscribed by a fair amount," said a banking source who asked to remain unidentified.
The four lead banks have agreed to commit $350 million each to the deal only if the additional financial backing materializes, the source said, but added: "That's a big if."
Furthermore, it is unclear whether UAL's board would accept the price of $175 a share, or a total of $3.7 billion, that the unions reportedly are preparing to offer. The new offer is said to provide for payment to shareholders of $150 in cash and securities valued at $25 a share.
In April, the board accepted in principle an offer valued at a total of about $201 a share, or $4.4 billion. Since then, the unions have lowered their bid because of the difficulties of obtaining financing and the turndown in prospects for the airline industry.
The United Employee Acquisition Corp., the union group led by former Chrysler executive Gerald Greenwald, had set Wednesday as a deadline for potential financial backers to agree to fund the buyout. Now, however, it has decided to wait until as late as Oct. 9, a deadline set by UAL's board, to give the banks more time to work on drumming up support.
United Press International, quoting an investment banker, reported that the unions have recruited banks for the buyout cause by using unusually high fees -- estimated at $200 million -- as an enticement.
UAL Chairman Stephen Wolf, who once joined the unions in making an earlier, unsuccessful bid for the airline, reportedly is opposed to accepting a lower bid from the unions. But Coniston Partners, a major investor in the airline, may back the offer.
The unions have lowered their offer for United because the airline industry is suffering from a combination of soaring costs for fuel and a soft market for air travel. The industry is expected to lose as much as $500 million this year.
A spokeswoman for the employee group declined to comment on the group's progress in finding financial backers.