US Airways 2003 Annual Report Download - page 40

Table of Contents
pay dividends, make additional corporate investments and acquisitions, enter into mergers and consolidations and modify certain concessions obtained as part
of the Chapter 11 reorganization. The amendment described below does not eliminate any of these covenants.
The ATSB Loan's financial covenants, modified as described below, were negotiated based upon the future expectations with respect to performance of
the Company and of the airline industry. These expectations included assumptions about the extent of a general recovery in the airline industry and the time
parameters within which that recovery might occur, as well as the Company's performance with respect to the rest of the industry. The Company needs to
satisfy these financial covenants beginning June 30, 2004.
Effective March 12, 2004, US Airways entered into an amendment to the ATSB Loan which provides for a partial prepayment of the loan and
modifications of financial covenants (covenant relief) for the measurement periods beginning June 30, 2004 through December 31, 2005. Existing ratios used
in financial covenants have been adjusted and reset to accommodate the Company's forecast for 2004 and 2005. In exchange for this covenant relief, US
Airways will make an immediate voluntary prepayment of $250 million, which will reduce, pro rata, all future scheduled principal payments of the ATSB
Loan (rather than shortening the remaining life of the loan). RSA, as one of the lenders under the ATSB Loan, will receive a pro rata portion of the
prepayment amount based on the percentage of the original aggregate amount of the ATSB Loan that RSA funded. The disinterested members of the Board of
Directors approved the voluntary prepayment, including RSA's receipt of its pro rata portion of the prepayment amount.
The amendment also provides for US Airways to retain, at its election, up to 25% of the net cash proceeds from any asset sale up to a total of $125
million to the extent that, among other things, definitive documentation for such asset sales is completed by February 28, 2005. In addition, US Airways may
now accept a third party secured note as permitted consideration for certain asset sales (including the US Airways Shuttle and wholly owned regional airline
assets) as long as certain conditions are met. Such conditions include that such note's amortization schedule shall be no more favorable than the ATSB Loan,
proceeds from such note are used to prepay the ATSB Loan, the credit strength of the ATSB Loan would not be affected adversely as measured by certain
ratings tests, and such note be pledged as collateral for the ATSB Loan. Finally, in consideration for the ATSB lenders waiving the provision related to the
going concern paragraph in the independent auditor's report for the Company's audited financial statements for the year December 31, 2003, US Airways
agreed to change the month end minimum unrestricted cash covenant to exceed the lesser of the outstanding ATSB Loan balance or $700 million and to
commit that no intra-month end of day unrestricted cash balance would fall below the lesser of the outstanding ATSB Loan balance or $575 million.
If the Company is unable to meet the aforementioned financial covenants, as amended, it would be in default under the ATSB Loan and the
Stabilization Board has the right to accelerate the ATSB Loan and exercise other remedies against US Airways. Such acceleration would have a material
adverse effect on the Company's future liquidity, results of operation and financial condition.
In November 2001, US Airways obtained a $404 million credit facility from General Electric (GE Credit Facility). The GE Credit Facility is secured by
collateral including 11 A320-family aircraft and 28 spare engines. As discussed below, the terms of this credit facility were renegotiated so that borrowings
bear interest rates of LIBOR plus 3.5% and the term of the facility was extended from 2006 to 2012.
GE is the Company's largest creditor. In addition to the GE Credit Facility, GE has provided financing or guarantees on 121 of the Company's current
operating aircraft. It also maintains the engines on the Company's B737-family aircraft, A320-family aircraft and B767 aircraft. In
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