Justice Eugene Wedoff, who has presided over the current UAL bankruptcy imbroglio, said the earlier injunction preventing State Street Bank & Trust Co, the administrator to United Employee Stock Option Plan (ESOP), from selling the 32 million share its oversees, will be remain in effect until “fuller” analysis can be given to the impact of stock sales on the company.
UAL’s ESOP held approximately 55% of UAL’s shares as late as September when State Street began selling off 24.1 million shares . However, a December 9 court order barred the selling of any more shares.
Attorneys for UAL argued the sale of shares could cause a change in ownership control of the company that has the potential to cost the airline more than $5 billion in future tax breaks from net operating losses. State Street countered that action must be taken quickly by the bank to retain the value of its investment, pointing to the steep decline in share price stocks of other companies in bankruptcy have experienced in the weeks after the initial bankruptcy filing.
UAL bondholders, who were similarly barred from trading UAL debt by the court last month, reached a tentative deal that would allow any institution with up to $200 million in bonds to trade their holdings. The court is expected to approve the measure during the January 15 hearing.
Judge Wedoff also said he would make a ruling on UAL’s emergency motion to reject collective-bargaining agreements on January 9 or 10, pending the results of voting by the unions and a reply from UAL. Although, Wedoff said he would not be sitting in court in Chicago at the time, he would still be able to make his ruling from California.
UAL previously filed a motion to reject existing deals with the Air Line Pilots Association (ALPA), the Association of Flight Attendants (AFA), the International Associations of Machinists and Aerospace Workers (IAM), the Transportation Workers Union (TWU) and the Professional Airline Flight Control Association (PAFCA). The airline has stated since filing for federal bankruptcy protection that cutting its labor costs would be a primary focus during reorganization. In the filing, United contends labor is “by far” its largest cost.
The airline has asked the ALPA for a 29% interim wage reduction, AFA for a 9% wage decrease, IAM for a 13% cutback, TWU for a 14% reduction and PAFCA for a 13% reduction. The unions would also forfeit any raises as part of the deal.
UAL has offered interim wage relief as an “alternative and more consensual path” to court-mandated wage cuts. The company contents such a move would satisfy covenants put in place by the debtor-in-possession financing and buy the company another 10 weeks “by which to address and resolve the transformational and labor relations imperatives on a collaborative basis.”