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UAL Buyout Group Reportedly At Work Restructuring Offer

October 17, 1989

CHICAGO (AP) _ Backers of a United Airlines buyout are working to salvage the deal whose failure to line up financing helped trigger the stock market’s Friday the 13th drop, but the revised plan could knock $1 billion off the price.

Stock of the airline’s parent company, UAL Corp., was down $23.87 to $199 a share by midday today on the New York Stock Exchange, after plummeting $56.87 1/2 a share on Monday.

A $300-a-share offer by United’s pilots and management collapsed and the company’s stock price began plunging Friday when banks refused to finance the $6.75 billion deal.

On Monday, top UAL Corp. executives flew to New York, Washington and Europe to meet with legal and financial advisers, bankers and lobbying strategists in an attempt to keep the buyout attempt alive.

Citibank, the New York-based bank that is leading a syndicate of lenders involved in the UAL deal, today confirmed reports that it had presented potential Japanese lenders with terms for a revised bid.

″We have expressions of interest from both the borrower and the banks,″ said spokeswoman Holly Cherico in New York. ″We do not have an agreement ... but we are working with both towards coming to a satisfactory resolution with the financing.″

Under the proposed terms, the bid would be lowered to $250 a share, said Akira Yokoo, a Citicorp spokesman in Tokyo. That would value UAL at about $5.62 billion.

The terms also called for a higher interest rate on the loan and bigger fees for participating banks, he said today.

United pilots issued a statement denying there was any formal offer at $250.

″All Citibank has been doing is sounding out various financial institutions to determine the acceptability of various changes from the original offer,″ the statement said.

U.S. and international banks have given ″expressions of interest″ in lending enough money to finance a UAL buyout, said Rodney F. Ballek, head of Citibank’s corporate finance division.

Those expressions, which are not formal commitments, are ″significantly in excess of what is required,″ Ballek told The New York Times.

However, the newspaper said it was not clear whether the terms of the financing would be acceptable to the management-pilot buyout group.

When the buyout group, which also includes British Airways PLC, announced Friday that financing had not gone through, it helped trigger a 190.58-point plunge in the Dow Jones industrial average, the steepest one-day point decline since the 1987 crash.

UAL stock Monday closed at $222.87 1/2 , down $56.87 1/2 on the day.

Stephen Dexter, an airline industry analyst with Kemper Financial Services Inc., said that shows that the market ″has very, very high doubt as to whether this deal can be consumated.″

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