CHICAGO -(Dow Jones)- UAL Corp. (UALAQ), the bankrupt parent of United Airlines, faces serious objections from the Pension Benefit Guaranty Corp. to its plan for emerging from bankruptcy.

Bill Brandt, a Chicago turnaround consultant with Development Specialties Inc., said the PBGC, the government agency which is assuming $6.6 billion of pension obligations from the airline, has a legitimate concern about UAL's plan.

The airline said it will compensate the PBGC with stock in the reorganized company, but UAL's disclosure plan said large shareholders, including the PBGC, can't sell their stock for five years, without consent from UAL's board of directors.

However, the PBGC said in a court filing Thursday that its deal with UAL to take over the pensions didn't include restrictions on the sale of common stock. Only preferred shares couldn't be sold for two years.

The PBGC said it wouldn't have agreed to a deal under the terms UAL seeks to impose.

"Given the state of the airline industry, and the fact that UAL's reorganization plan assumes that the price of oil will be $50 a barrel, UAL stock may not be worth very much in five years," Brandt said. The PBGC and other creditors would like to sell it as soon as possible after it's issued.

A spokeswoman for UAL said Friday that the company expects to resolve issues with creditors prior to a court hearing on Oct. 20, when objections to UAL's disclosure plan will be heard. UAL also faces objections from dozens of other creditors.

UAL said it needs to restrict big stock sales for tax reasons.

Brandt said it might be difficult for UAL to overcome the objections to its disclosure plan. "UAL was hoping to sell their creditors on the plan right away, the way Kmart did. To do that, you have to offer them some cash." One way to sweeten the deal for creditors would be to open the reorganization plan to outside investors, Brandt said. Instead, UAL got $3 billion of debt financing, led by JP Morgan and Citigroup.

"UAL is a great franchise, which could attract an investor," Brandt said. But, he said, if they did that, UAL management would run the risk that a substantial stakeholder would call for their ouster.

UAL, which filed for bankruptcy in December 2002, has said it intends to exit bankruptcy by early next year.

-By Ann Keeton, Dow Jones Newswires; 312-750-4120; ann.keeton@dowjones.com

(END) Dow Jones Newswires

10-14-05 1900ET