United seeks 'initiatives' to pay back lenders

UAL Corp.'s United Airlines is asking lenders to let it repay $350 million in debt and implement as much as $500 million in "shareholder initiatives" such as stock buybacks.

The plan was presented to lenders Tuesday, with a decision likely next week, Chicago-based United said in a statement. "The type and timing of any initiative, which could mean things like dividends and buybacks, would be up to the board," spokeswoman Jean Medina said in an e-mailed statement.

United's request comes amid investor demands that U.S. carriers take action to raise their stock value, as the Bloomberg U.S. Airlines Index has fallen 25 percent this year. Pardus Capital Management LP, an owner of UAL and Delta Air Lines Inc. shares, earlier this month urged Delta to seek a merger with UAL.

Jake Brace, UAL's chief financial officer, said Nov. 7 the company would use any cash in excess of $3 billion to improve its balance sheet and benefit shareholders, possibly through measures such as a stock repurchase.

UAL said in its Oct. 23 release on third-quarter earnings it had $5 billion in cash and short-term investments as of Sept. 30, including $788 million in restricted cash.

United said Tuesday if changes to its credit agreement are approved, additional shareholder initiatives would be permitted in exchange for further early debt repayments.

The airline said it cut total net debt by $2.7 billion in the 20 months since it left bankruptcy and generated more than $2 billion in operating cash flow in this year's first nine months.

Goldman, Sachs & Co. Tuesday raised its rating on UAL to "buy" from "neutral" and added the company to its America's Buy list. United will benefit from U.S. capacity restraints and growth in international markets where it doesn't face low-fare competition, analyst Robert Barry said in a report.