UAL ESOP Cleared For "Sell" Off

January 13, 2003 ( - UAL Corp, parent of bankrupt United Airlines, has agreed to allow State Street Bank & Trust, the independent trustee of its employee stock ownership plan, to sell up to 12.86 million more UAL shares.

UAL said the sale of 12.86 million ESOP shares would not trigger an ownership shift under what is known as the “sunset” provision of the ESOP.    By not triggering the provision, the company said net operating losses that the airline is seeking to preserve would not be jeopardized, according to the Reuters report.

Employee Owned

Pilots, machinists and salaried and management workers currently own a 55% stake in the airline, after an employee ownership plan was implemented in 1994. However, when United began teetering on the edge of bankruptcy in the fall, State Street Bank started heading for the exits, selling out of the holdings to preserve some value.   As of December 18, State Street had  sold 24 million shares  and had another 33 million in the plan.

Unions and the airline both  objected to the sales , saying they were not in the best interest of UAL employees who own a share of the company. Shortly after United filed for bankruptcy on December 9, US Bankruptcy Court  Judge Eugene Wedoff agreed , issuing a temporary order barring large stockholders and bondholders from selling or transferring shares while he considered the tax issue. Wedoff is scheduled to hear additional arguments on January 16.

However, United has now sent a letter to State Street outlining the additional shares that could be sold.   “They can begin selling those shares right away,” said United spokesman Jeff Green. “This is separate from what’s going on in court.”