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To: pallmer who wrote (3970)	12/12/2002 3:30:05 PM
From: pallmer	Read Replies (1) \| Respond to of 29599

-- =DJ Major UAL Shareholders -2: Order May Be Reversed >UAL -- UAL is trying to take advantage of tax code provisions that allow businesses to carry forward their net operating losses to offset future taxable income for up to 20 years. In court papers, UAL said it feared that it won't be able to tap the provisions should substantial sales of stock or claims trigger a change of ownership. A change of ownership occurs when the percentage of the UAL stock held by a shareholder owning 5% of more of the company increases by 50 percentage points or more. Under the tax code, a company that changes ownership would face difficulties in using the carryforwards, UAL said in the court papers. Zohn, the Proskauer partner, said the latest court order is "a rather drastic expansion" of the authority that case law entitles a bankruptcy court. He added that the court might eliminate the injunction at the Dec. 30 hearing, where the involved parties will make arguments supporting or opposing the order. If the order isn't eliminated, that could further demoralize UAL employees, who have no other way of recovering what's left of their ESOP investment. Even without such an order, shares of companies under bankruptcy-court protection often spike during the first week following their Chapter 11 filing, Zohn noted. That's because "the mere fact of a filing increases interest among speculators" who buy the stock on the hope of a short-term profit, he said. Uninformed individual investors often join in the temporary buying spree, he said. What's more, some investors may be speculating that UAL stock could retain some value should employees form a committee to represent their stock plan in Chapter 11 proceedings, said Raymond Neidl, airline and aerospace analyst at Blaylock & Partners L.P. Spokesmen for unions representing United pilots and machinists weren't immediately available to comment on whether such a shareholders committee is in the works. Prior to the latest ESOP sale, pilots owned about 25% of UAL, while machinists held about 20%. Regardless of whether such a committee is formed or not, Neidl, who has a sell rating on UAL and doesn't own shares, said the value of the stock will be wiped out at one point. In Chapter 11, creditors have to be paid out before any money is allocated to shareholders. The latest court order relieves State Street of its fiduciary responsibility to make investment decisions for the stock plan on behalf of UAL employees. That responsibility was handed over to the bank in August, when the Chicago company warned that it might seek Chapter 11. Despite serious financial problems faced by UAL at the time, State Street's decision to sell part of the ESOP stake infuriated employees, who were still hopeful of the company's out-of-court restructuring. "My guess is that the trustee will welcome the ruling" because "it will help the trustee avoid the conflict between its duties to the employees and its duties under the plan," Zohn said. - By Sonoko Setaishi; Dow Jones Newswires; 201-938-4148; sonoko.setaishi@dowjones.com (END) Dow Jones Newswires 12-12-02 1527ET- - 03 27 PM EST 12-12-02 Symbols: US;STT US;UAL 12-Dec-2002 20:27:00 GMT Source DJ - Dow Jones