Continental Air announces successful lease restructurings.

HOUSTON--(BUSINESS WIRE)--July 12, 1995--Continental Airlines, Inc. (NYSE CAI.A and CAI.B) announced today that it has successfully concluded the restructuring of leases and related agreements with respect to 27 widebody aircraft, and has entered into agreements in principle with respect to 3 additional aircraft.

In January, Continental announced that it was grounding, or reducing or deferring rent with respect to, a total of 35 widebody aircraft. Continental has now entered into definitive agreements or agreements in principle covering 30 of the 35 affected aircraft, which are expected to defer payments or result in cash concessions of approximately $77 million and $75 million during 1995 and 1996, respectively, and result in the elimination of substantial operating lease payments after 1996. In addition, the definitive agreements permit Continental to continue the deferral of certain 1995 and 1996 principal payments, and certain 1995 operating lease payments, otherwise payable to the Company's principal lender and its affiliates.

In connection with the definitive agreements, Continental will promptly issue to the lessors of the returned aircraft approximately $114 million of its Series A 6% Convertible Secured Debentures due 2002 and $25 million of its Series B 8% Convertible Secured Debentures due 2000, will secure and restructure approximately $17 million of aircraft modification and other indebtedness, and will make certain other payments.

The Series A Debentures provide for interest to be paid in additional Series A Debentures through January 31, 1997, and the Series B Debentures provide for interest to be paid in additional Series B Debentures through January 31, 1996. The debentures will be convertible after August 1, 1996, if not previously called by Continental, into Class B common stock of Continental at an initial conversion price of $26 per share. The Series A Debentures may be called for redemption at any time by Continental at par, and the Series B Debentures may be called for redemption at any time by Continental for a 15% premium. Continental may issue approximately $50 to $60 million of additional Series A Debentures in connection with any future settlements relating to the remaining grounded aircraft.

If all such debentures were converted at August 1, 1996, the aggregate dilution to currently outstanding common stock would be approximately 23%. Continental is currently considering refinancing options which would permit it to redeem the debentures before they become convertible. The Company continues to negotiate with lessors and lenders regarding certain of the remaining grounded aircraft, and is in the process of restructuring an additional $65 million of unrelated senior indebtedness.

"We are pleased with the spirit of cooperation which the vast majority of our aircraft lessors have shown throughout this process," said Gordon Bethune, President and Chief Executive Officer of Continental. "We appreciate the confidence they have demonstrated in our ability to make Continental a profitable airline. The agreements we have reached to date assure the success of the restructuring component of the Go Forward Plan we announced earlier this year."

The issuance of the debentures would normally require approval of the holders of common stock of Continental pursuant to the stockholder approval policy of the New York Stock Exchange. Continental, as permitted by an exception contained in that policy, is not seeking such stockholder approval. The Audit Committee of the Board of Directors of Continental determined that the delay necessary to receive stockholder approval pursuant to the NYSE policy prior to issuance of the debentures would have undermined Continental's ability to negotiate prompt and satisfactory agreements with the lessors and therefore would seriously jeopardize the financial viability of Continental. The Audit Committee, as permitted by such policy, expressly approved Continental's decision not to seek stockholder approval of the issuance of the debentures. The NYSE has accepted Continental's reliance on the exception contained in the NYSE's policy.

CONTACT: Continental Corporate Communications, 713/834-5080