Delta Airlines 2008 Annual Report Download - page 102

Table of Contents
Index to Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(9) This item includes a reduction in the carrying value of (1) Northwest's debt as a result of purchase accounting related to the Merger and (2) the debt recorded in connection with the
American Express Agreement. This item also includes fair value adjustments to our long-term debt in connection with our adoption of fresh start reporting upon our emergence from
bankruptcy. These adjustments will be amortized to interest expense over the remaining maturities of the respective debt.
Delta Exit Financing
The Exit Facilities consist of a $1.0 billion first-lien revolving credit facility (the "Revolving Facility"), a $600 million first-lien synthetic revolving
facility (the "Synthetic Facility") (together with the Revolving Facility, the "First-Lien Facilities"), and a $900 million second-lien term loan facility (the
"Term Loan" or the "Second-Lien Facility"). During 2008, we borrowed the entire amount of the Revolving Facility. Borrowings under the First-Lien
Facilities are due in April 2012 and borrowings under the Second-Lien Facility are due in April 2014.
Our obligations under the Exit Facilities are guaranteed by substantially all of our domestic subsidiaries, including, after the closing of the Merger,
Northwest Airlines Corporation and certain of its subsidiaries (the "Guarantors"). The Exit Facilities and the related guarantees are secured by liens on
substantially all of our and the Guarantors' present and future assets (excluding, in the case of Northwest Guarantors, assets subject to existing liens at the time
of closing of the Merger) (the "Collateral"). The First-Lien Facilities are secured by a first priority security interest in the Collateral. The Second-Lien Facility
is secured by a second priority security interest in the Collateral.
The Exit Facilities include affirmative, negative and financial covenants that restrict our ability to, among other things, incur additional secured
indebtedness, make investments, sell or otherwise dispose of assets if not in compliance with the collateral coverage ratio tests, pay dividends or repurchase
stock. These covenants may have a material adverse impact on our operations. The Exit Facilities contain financial covenants that require us to:
• maintain a minimum fixed charge coverage ratio (defined as the ratio of (1) earnings before interest, taxes, depreciation, amortization and aircraft
rent, and subject to other adjustments to net income ("EBITDAR") to (2) the sum of gross cash interest expense, cash aircraft rent expense and
the interest portion of our capitalized lease obligations, for successive trailing 12-month periods ending at each quarter-end date through the
maturity date of the respective Exit Facilities), which minimum ratio will range from 1.00:1 to 1.20:1 in the case of the First-Lien Facilities and
from 0.85:1 to 1.02:1 in the case of the Second-Lien Facility;
• maintain unrestricted cash, cash equivalents and permitted investments of not less than $750 million in the case of the First-Lien Facilities and
$650 million in the case of the Second-Lien Facility;
• maintain a minimum total collateral coverage ratio (defined as the ratio of (1) certain of the Collateral that meets specified eligibility standards
("Eligible Collateral") to (2) the sum of the aggregate outstanding exposure under the First-Lien Facilities and the Second-Lien Facility and the
aggregate termination value of certain hedging agreements) of 125% at all times; and
• in the case of the First-Lien Facilities, also maintain a minimum first-lien collateral coverage ratio (together with the total collateral coverage
ratio described above, the "collateral coverage ratios") (defined as the ratio of (1) Eligible Collateral to (2) the sum of the aggregate outstanding
exposure under the First Lien Facilities and the aggregate termination value of certain hedging agreements) of 175% at all times.
The Exit Facilities contain events of default customary for senior secured exit financings, including cross-defaults to other material indebtedness and
certain change of control events. The Exit Facilities also include events of default specific to our business, including the suspension of all or substantially all
of our flights and
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