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United Airlines set to upend secured bond market

A ruling expected this week on United Airlines' secured bonds could upset the industry's debt market, making it far harder for airlines to borrow money in the future.

Like many airlines, the majority of US operator United's debt is issued in the form of Enhanced Equipment Trust Certificates (EETCs) ? bonds secured on the airline's assets, usually aeroplanes. But a US bankruptcy court last week issued a temporary restraining order preventing United's creditors from taking control of about 14 aircraft.

If the order is made permanent on Friday it will undercut the validity of EETCs, restricting the amount that airlines can borrow in this way and making any form of borrowing more expensive.

Rating agency Standard & Poor's, which rates some $30 billion of secured airline debt, warned that it could lower ratings on that debt if the court decision went in favour of United and the creditors were prevented from collecting their security.