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United Airlines seeks to enhance liquidity by $1.2 Billion

24th July 2008 Print
UAL Corporation, the holding company whose primary subsidiary is United Airlines, today announced that it reached an agreement in principle with its Mileage Plus co-branded bank card partner, Chase Bank U.S.A., and Paymentech, one of its credit card processors, to extend the term of their respective agreements.

As part of the transaction, United will receive a payment of $600 million from Chase, which relates to the advance purchase of frequent flyer miles and the extension of the contract. The company also expects this transaction will improve cash flow by about $200 million in the next two years.

In addition, the level of reserve or holdback that United is required to maintain under its credit card processing agreement with Chase / Paymentech L.L.C. has been reduced to $25 million. This reduction will result in the release of approximately $350 million in previously restricted cash.

As a result of its agreement with Chase, the company expects to increase its cash position by approximately $1.2 billion, including $1 billion in the short term and an additional $200 million over the next two years. Combined with the previously announced approximately $550 million raised from new transactions in the second and third quarters, the company will have increased its total cash balance by $1.7 billion and continues to have more than $3 billion in unencumbered hard assets.