NEW YORK -- The four lead banks backing the proposed union buyout of UAL Corp. appear to be making progress in their effort to assemble a broad group of lenders to underwrite $2 billion in bank loans for the deal.
Based on preliminary responses from some potential participants in the underwriting group, the bank loans have already been oversubscribed, said a banking source familiar with the situation.
No commitments have been made as yet, and the preliminary responses have come from loan origination officials, who must take their recommendations to the credit policy committees of their banks.
It's by no means assured that the recommendations will be accepted by the these committees. But given the volatile, high-profile history of the UAL buyout effort, it's considered unlikely that any loan origination official would recommend the deal lightly, a banking source said.
The four lead banks backing the union buyout effort -- the banking units of Bankers Trust New York Corp., Manufacturers Hanover Corp., Security Pacific Corp., and First Chicago Corp. -- are each prepared to commit $350 million.
While that leaves only $600 million to be raised from the 22 other banks invited to join the underwriting effort, the lead banks won't go ahead with the deal unless the $2 billion target is significantly oversubscribed, sources said.
Bank commitments are supposed to be due today, under a deadline set by Gerald Greenwald, the former Chrysler Corp. official who would run UAL if the buyout succeeds.
The buyout group faces an Oct. 9 deadline to have all financing in place. But, "there's some stretch in that Oct. 3 date," a source said.