Hemorrhaging cash and spurned by the federal government, UAL Corporation became the largest airline ever to file for Chapter 11 bankruptcy protection. In its petition, filed in Chicago bankruptcy court in mid-December, United revealed that it was staggering under a cash burn rate as high as $22 million a day. The world's second-largest airline blamed stratospheric labor costs and a dearth of full-fare business travelers for its financial crisis. United wasn't the only major U.S. airline to declare bankruptcy in 2002; US Airways Group, Inc., filed for Chapter 11 protection in mid-August [Big Suits, October 2002].
United's bankruptcy became all but inevitable after the Air Transportation Stabilization Board rejected the carrier's application for $1.8 billion in federal loan guarantees in early December. The airline listed $22.7 billion in assets and $21.5 billion in liabilities in its bankruptcy filing. A group of banks agreed to provide the foundering carrier with $1.5 billion in debtor-in-possession financing, subject to strict conditions. United has said that it will honor all tickets and frequent-flier miles as it fights to stem cash burn and slash operating costs.
For Debtor UAL Corporation (Elk Grove Township, Illinois)
In-House: Senior vice president, general counsel, and secretary Francesca Maher; assistant general counsel Marian Durkin and Stephen Sawyer; and senior counsel Jennifer Coyne and David Olaussen.
Kirkland & Ellis (Chicago):
Bankruptcy: Marc Kieselstein, Lyndon Norley, Geoffrey Richards, David Seligman, James Sprayregen, of counsel Joseph Schorer, and associates Salvatore Bianca, Marc Carmel, Erik Chalut, Kathleen Cimo, Andre Davis, Jeffrey Gettleman, Jason Horwitz, Steven Kotarba, James Mazza, Nicole Miller, Abrielle Rosenthal, and James Wong.
Labor and general litigation: Alexander Dimitrief, James Joslin, Brian Sieve, and associates Justin Barker, Paul Ferak, R. Christopher Heck, Andrew Kassof, Jeffrey Miller, Michael Slade, A. Katrine Wiechens, and Jason Zakia.
Antitrust: Steven Bradbury.
Corporate: R. Scott Falk, Stacey Kern, of counsel William Singer, and associates Timothy Eloe, Jody Gale, Bradley Hanna, and Constantine Koutsouvas.
Derivatives and hedges: Scott Gordon and associate Michael Wolf.
Finance: Linda Myers, Maureen Sweeney, and associate Michelle Mulkern.
Aircraft and structured finance: Kenneth Morrison, Kelly Schell, and associates Martin Attea and Chuan Li.
Tax: Todd Maynes and associate Gregory Gallagher.
Employee Benefits: Vicki Vallen Hood and associate Maureen O'Brien.
Real estate: Gregory Spitzer and associates Gary Axelrod and Brian Davis.
(Norley, Rosenthal, and Wong are in the firm's London office; Bradbury is in Washington, D.C.; and Gordon is in New York.) Kirkland, which has represented United in other matters, won a beauty contest to serve as lead bankruptcy counsel.
Paul, Hastings, Janofsky & Walker (Los Angeles):
Employment: John Gallagher, Jon Geier, Kenneth Willner, of counsel Margaret Spurlin, and associates Dianne Coombs and C. Scott Williams.
Litigation: Scott Flicker and Robert Span.
(All are in the firm's Washington, D.C. office, except Span, who is in Los Angeles.) The firm is providing labor advice.
Piper Rudnick (Washington, D.C.):
Cynthia Surrisi. (Surrisi is in Chicago.) The firm, which had been representing United in prepetition union negotiations, is providing labor advice.
Vedder, Price, Kaufman & Kammholz (Chicago):
Douglas Lipke. The firm is special aircraft financing counsel.
Sonnenschein Nath & Rosenthal (Chicago):
Bankruptcy: Fruman Jacobson, Carole Neville, Robert Richards, of counsel J. Robert Nelson, and associates Patrick Maxcy and Daphnee Supris.
Corporate: Shirley Curfman, Victoria Gilbert, Linda Chaplik Harris, Thomas Vandiver, of counsel Eric Marshall, and associate Richard Sandowsky.
Labor and employment: Roger Brice and Richard Marcus.
Tax: Marc Teitelbaum.
Employee benefits and executive compensation: Roger Siske and Ronald Stauffer.
(Neville, Supris, Roxland, Sadowsky, and Teitelbaum are in the firm's New York office; Nelson, Curfman, and Gilbert are in Los Angeles; Vandiver is in St. Louis; and Stauffer is in Washington, D.C.)
For Coagents Under the Debtor-In-Possession Credit Agreement J.P. Morgan Chase & Co. (New York) and Citicorp USA, Inc. (New York)
Morgan, Lewis & Bockius (Philadelphia):
Financial restructuring: Robert Scheibe, Jay Teitelbaum, and associates Leonard Klingbaum and Peter Montoni.
Finance: associate Michael Anderson and Christopher Owens.
(All are in the firm's New York office.) Morgan, Lewis frequently advises both banks on DIP financing.
For DIP Lender Bank One Corporation (Chicago)
Latham & Watkins (Los Angeles):
Bankruptcy: Josef Athanas, David Heller, and associate Timothy Barnes.
Finance: James Doran and associate Bradley Kotler.
(All are in the firm's Chicago office.) Bank One retained Latham for its expertise in DIP financing.
For DIP Lender CIT Group/Business Credit, Inc. (New York)
Schulte Roth & Zabel (New York):
Corporate Finance: Nancy Finkelstein and associate Helen Lloyd-Davis.
Bankruptcy: Michael Cook and associate Robert Mrofka.
The firm frequently represents CIT Group.
Outlook
United says it needs huge concessions from its labor unions to meet monthly cash flow requirements under the DIP loans. If the airline fails to meet those requirements, it could be pushed into Chapter 7 liquidation. Shareholders will likely be wiped out in the restructuring process; employees owned about 55 percent of the airline before the bankruptcy filing.
This article is republished with permission from law.com and the February 2003 edition of The American Lawyer. © 2003 NLP IP Company.
