UAL Corp.'s $2.8 billion term loan, which is part of the airline's exit financing, broke in the secondary market at 101 1/4 last week. A trader estimated $50 million of paper changed hands on the day it broke. JPMorgan and Citigroup lead the deal, which is priced at LIBOR plus 3 3/4% and which also includes a $200 million revolver. The term loan traded as high as 102 1/4 and then dipped down to 101 3/4. The volatility on the name is evidence of an overheated market, one trader said. The exit financing was two times oversubscribed, enabling the company to take 75 basis points off the price of the term loan.
UAL, the holding company of United Air Lines, formally exited bankruptcy last week after the United States Bankruptcy Court confirmed its plan of reorganization. In a release, the company said it has reduced its average annual costs by approximately $7 billion. UAL began issuing shares of common stock in the reorganized company. Most of the shares will go to its former unsecured creditors. Standard & Poor's raised its corporate credit ratings on UAL and United Air Lines to B from D after the confirmation of its reorganization. It affirmed the B+ and 1 recovery rating on the bank facility. A UAL spokesperson could not be reached.