United Airlines parent UAL Corp. filed its Disclosure Statement yesterday in its longstanding chapter 11 case in Chicago and it was not a pretty sight. United was the second major airline to seek bankruptcy court protection during the current downturn in the industry that started in 2001. US Airways Group Inc. is about to emerge from a chapter 22 bankruptcy (two chapter 11 cases in a three year period) and merge with America West Holdings Corp. Delta Air Lines and Northwest Airlines both are currently on the brink of chapter 11. Here are previous posts that chronicle the UAL bankruptcy saga.

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UAL Corp.’s shopping excursion for reorganization take-out financing has apparently resulted in a preliminary commitment of a cool $3 billion in financing from four lending lending institutions that, if consummated, would allow the troubled airline to emerge from over three years in chapter 11. The four lenders involved in the negotiations with UAL are apparently Citigroup Inc., J.P. Morgan Chase & Co., General Electric Co. and Deutsche Bank AG.
The take-out financing would allow UAL to repay a $1.3 billion debtor-in-possession loan it has been relying on during its chapter 11 case, and will be incorporated in a reorganization plan that the company plans to file with its Chicago Bankruptcy Court soon. In the meantime, UAL continues to bleed, incurring a net loss of almost $275 million for July as the company incurs huge non-cash reorganization expenses relating to renegotiation of leases on key aircraft.

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To proceed or not to proceed? That is often the question that a creditor has in regard to taking further legal action against a debtor that has just filed a bankruptcy case.
Under section 362 of the Bankruptcy Code, a wide-ranging injunction — dubbed the “automatic stay” — arises immediately upon the filing of a bankruptcy case. That injunction enjoins — pending further Bankruptcy Court order — most legal actions by creditors against either the debtor or the debtor’s property, which is referred to in bankruptcy parlance as “property of the [debtor’s] estate.” Although the automatic stay is quite clear, it is often decidedly unclear whether a particular piece of property is “property of the estate” at the time of a debtor’s bankruptcy and, thus, subject to the automatic stay against creditor actions. Given that it is rarely a good idea to violate a court-imposed injunction, the breadth of the stay is an issue that tends to interest most business lawyers and businesspeople.

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Houston-based funeral and cemetary operater Service Corporation International notified investors and federal regulators yesterday that it plans to delay its second-quarter earnings report to finish an accounting review involving 430,000 prepaid funeral services. The company said that it expects the delay to be about 10 days and it will file the second-quarter report shortly thereafter.
The company said it could have to restate financial reports for the first quarter of 2005, each of the four quarters of 2004 and 2003, and each of the fiscal years that ended Dec. 31, 2000 through 2004. The adjustments so far total $7.5 million, which — if those are the only adjustments — are not materially adverse for a company the size of SCI.

Don’t miss Wall Street Journal ($) columnist Holman Jenkins’ analysis of the decision in the Disney case, which includes the following broadside at Disney CEO Michael Eisner:

Mr. Ovitz may be as disagreeable a personality as some press accounts insist. But the accusations leveled against him by Disney’s CEO (“psychopath,” “liar,” “incompetent”), which were demonstrably intended to be conveyed to the press, might more readily apply to Mr. Eisner himself.

This NY Times article reports that Delta Airlines is finalizing debtor-in-possession financing arrangements, which is a strong signal that the airline is likely to file a chapter 11 case in the near future.
Debtor-in-possession (“DIP”) financing provides loans that a chapter 11 debtor taps immediately after the commencement of a chapter 11 reorganization to bridge the debtor’s pre-bankruptcy financing arrangements with the financing that is ultimately approved under the debtor’s confirmed reorganization plan under which the debtor emerges from chapter 11. The U.S. Bankruptcy Code provides several legal protections to induce lenders to provide DIP financing, so DIP financing — particularly in big reorganization cases — has become a quite lucrative area of the financing business that attracts a number of large lenders. Consequently, although it would at first seem somewhat counterintuitive in regard to a financially-strapped company such as Delta, there is probably quite a bit of competition going on within the DIP financing community for Delta’s business in this area.