UAL Bond Trading Ban to Lift

December 31, 2002 ( - An agreement has been reached that will allow bondholders of bankrupt UAL Corp, the parent company of United Airlines, to resume selling of its debt obligations, according to a Reuters report.

The tentative agreement, expected to be approved in bankruptcy court on January 15, allows institutions with up to $200 million in bonds to resume trading their holdings, according to the report.

UAL had previously won a  ban on institutions holding $65 million or more in bonds from trading their debt under a “claims trading” provision aimed at protecting tax deductions.   UAL had alleged the selling of its stocks and bonds could cause the company miss out on approximately $1.4 billion in future tax deductions under technical “change of control” provisions in the tax code.

Holders of large amounts of UAL bonds subject to the ban, including Lehman Brothers and Citigroup, immediately filed  objections to the order , charging that the hold on bond trading violated Constitutional property rights.

However, this latest agreement does not cover the sale of UAL stocks, currently under a similar trading hiatus. State Street Bank and Trust Co, the administrator of UAL’s Employee Stock Option Plan (ESOP), reported to hold up to 55% of the company’s stock, has lobbied the court to  eliminate this “claims trading” provision  for stockholders.