United Claim May Make Airline Bonds a Riskier Buy

Fine, Jacob
April 2003
Bond Buyer;4/4/2003, Vol. 344 Issue 31608, p7
Trade Publication
United Airlines Inc.'s position that its failure to make$ 16 million worth of debt service payments to special facility revenue bondholders on April 1,2003 does not violate its lease agreements to operate at four airports spread concern through the municipal market this week because it cast doubt on what investors perceived as security behind the debt. Bear Stearns estimates that overall there is some $2.8 billion of municipal debt outstanding that is backed by leases with airlines other than United that has similar re-let provisions. Those bonds last traded in a price range of 13 to 15 cents on the dollar before year's end, compared to bonds that carried the eviction and re-let provisions, which traded around 45 cents on the dollar. & ldquo; If this concept gets thrown out, then you're going to have the implosion of prices of billions of dollars worth of bonds,& rdquo; said one broker who has sold the United special facility airline bonds in question to clients, and personally owns similar bonds issued for other airlines.


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