Delta Airlines 2004 Annual Report Download - page 87

Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
incur or secure other debt, make investments, sell assets, pay dividends or repurchase stock and make capital expenditures.
The financial covenants require us to:
• maintain unrestricted funds not less than $900 million at all times until February 28, 2005, $1 billion at all times from March 1, 2005
through October 31, 2005 and $750 million at all times thereafter (the "Liquidity Covenant").
• maintain accounts pledged for the benefit of the lenders with funds of not less than $650 million at all times until October 31, 2005,
$550 million at all times from November 1, 2005 through February 28, 2006 and $650 million at all times thereafter. The cash and cash
equivalents in those accounts can be used for purposes of determining compliance with the Liquidity Covenant.
• not exceed specified levels of capital expenditures during each fiscal quarter.
• achieve specified levels of EBITDAR, as defined, for designated rolling periods (generally monthly tests for successive trailing 12-month
periods) through November 2007. During 2005, we are required to achieve increasing levels of EBITDAR, including EBITDAR of
$1.590 billion for the 12-month period ending December 31, 2005. Thereafter, the minimum EBITDAR level for successive trailing 12-
month periods continues to increase, including $2.763 billion for the 12-month period ending December 31, 2006 and $3.136 billion for the
12-month period ending November 30, 2007. The EBITDAR covenant effectively provides that if our cash on hand exceeds the minimum
cash on hand that we are required to maintain pursuant to the Liquidity Covenant by at least $100 million, then the EBITDAR level that we
are required to achieve will be reduced by a specific amount.
The GE Commercial Finance Facility contains customary events of default, including cross defaults to the Amex Facilities and our other debt and certain
change of control events. Upon the occurrence of an event of default, the outstanding obligations under the Term Loan and the Revolver may be accelerated
and become due and payable immediately (unless the lenders waive the event of default).
In November 2004, as a condition to availability of the GE Commercial Finance Facility, we granted GECC the right, exercisable to November 2, 2005, to
lease to us (or, at our option subject to certain conditions, certain Delta Connection carriers) up to 12 CRJ-200 aircraft then leased to another airline. See
Note 8 for additional information about this right and the related leases.
Financing Agreement with Amex
During the December 2004 quarter, we entered into two agreements ("Amex Facilities") to borrow $500 million from Amex. As discussed below, the
Amex Facilities consist of substantially identical supplements to the two existing agreements under which Amex purchases SkyMiles from us, the
Membership Rewards Agreement and the Co-Branded Credit Card Program Agreement ("SkyMiles Agreements").
Pursuant to the terms of the Amex Facilities, Amex agreed to make advances to us, as prepayment for purchases of SkyMiles under the SkyMiles
Agreements, in two installments of $250 million each. The initial installment was paid on December 1, 2004 and the final installment was paid on March 1,
2005. The prepayment amount will be credited, in equal monthly installments, towards Amex's actual purchases of SkyMiles during the 24-month period
commencing in December 2005. Any unused prepayment credit will carry over to the next succeeding month with a final repayment date for any then
outstanding advances no later than December 1, 2007. The outstanding advances will bear a fee, equivalent to interest, at a rate of LIBOR plus a margin of
7.75% over LIBOR, subject to a LIBOR floor of 3%.
Our obligations under the Amex Facilities are guaranteed by the same Guarantors as for the GE Commercial Finance Facility. We will be required to
make certain mandatory repayments of advances in the event we sell ASA Holdings and subsidiaries and Comair Holdings and subsidiaries.
F-30