CHICAGO (AP) — United Continental Holdings Inc. said on Thursday that it will issue notes to the Pension Benefit Guaranty Corp. under a series of payouts that could eventually total $500 million.
The arrangement dates to United Airlines' trip through bankruptcy protection. It terminated its pensions in 2005, handing them over to the PBGC, the federal agency that takes over pension plans when the employer can no longer support them. United emerged from bankruptcy protection in 2006.
The agreement calls for United to issue notes if it meets certain profit goals between 2009 and 2017. That happened for the period that ended June 30, the company said. That means it has to issue $62.5 million in 8 percent notes by Feb. 14, 2012.
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United and Continental merged into one company last year, and the profits from the combined operation were enough to trigger the notes. It said this is the first time it has had to issue the notes.
The notes are one of several special items that will reduce United Continental second-quarter earnings by $39 million, and earnings for the first half of the year by $116 million.
The second-quarter charges include a $49 million expense for the PBGC notes, another $97 million in integration expenses, as well as $107 million in revenue from combining the United and Continental frequent flier credit card with Chase, which had previously offered separate cards for United and Continental.
United Continental is set to report second-quarter results on July 21.
On Thursday its shares fell 40 cents to $21.30 in afternoon trading.
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