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Bad bets on fuel prices means United Airlines parent will sell $200 million in s

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  • Tpatel1105@aol.com
    United Airlines parent UAL Corp., facing losses from bets on future fuel-purchase contracts, will sell as much as $200 million in shares. JPMorgan Chase & Co.
    Message 1 of 1 , Dec 1, 2008
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      United Airlines parent UAL Corp., facing losses from bets on future fuel-purchase contracts, will sell as much as $200 million in shares.

      JPMorgan Chase & Co. and Morgan Stanley & Co. will manage the transaction, Chicago-based UAL said today in a U.S. regulatory filing. UAL said it would use the proceeds for general corporate purposes.

      The offering shows the strain on UAL as the declining price of jet fuel forces the third-largest U.S. airline to post cash collateral on hedging contracts. Credit-card processor JPMorgan Chase agreed last week to a temporary waiver of a penalty triggered if UALs cash falls below set levels.

      UAL said last week it expects about $242 million in hedging losses this quarter and non-cash costs of $138 million to adjust contracts to current market value. Jamie Baker, a JPMorgan analyst, estimates UAL would be required to post about $990 million in collateral with oil priced at $55 a barrel, excluding October requirements.

      Crude oil for January delivery traded at $50.94 a barrel this morning on the New York Mercantile Exchange. Oil, from which jet fuel is refined, has tumbled 65 percent since peaking at $147.27 on July 11.

      UAL slid $1.57, or 14 percent, to $9.68 in midmorning Nasdaq Stock Market composite trading. The shares fell 68 percent this year in Nasdaq trading before today.




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