US Airways 2004 Annual Report Download - page 35

Table of Contents
Special Facility Revenue Bonds
In June 1999, Series 1999 special facility revenue bonds ("new bonds") were issued by a municipality to fund the retirement of the Series 1994A bonds
("old bonds") and the construction of a new concourse with 14 gates at Terminal 4 in Phoenix Sky Harbor International Airport in support of AWA's strategic
growth plan. The new bonds are due June 2019 with interest accruing at 6.25% per annum payable semiannually on June 1 and December 1, commencing on
December 1, 1999. The new bonds are subject to optional redemption prior to the maturity date on or after June 1, 2009 in whole or in part, on any interest
payment date at the following redemption prices: 101% on June 1 or December 1, 2009; 100.5% on June 1 or December 1, 2010; and 100% on June 1, 2011
and thereafter. In accordance with Emerging Issues Task Force ("EITF") Issue No. 97-10, "The Effect of Lessee Involvement in Asset Construction," the
Company accounts for this as an operating lease.
In connection with these bonds, AWA entered into an Amended and Restated Airport Use Agreement, pursuant to which AWA agreed to make sufficient
payments to the Industrial Development Authority ("IDA") to cover the principal and interest of the bonds and to indemnify the IDA for any claims arising
out of the issuance and sale of the bonds and the use and occupancy of the concourses financed by these bonds and the old bonds. At December 31, 2004, the
outstanding principal amount of the bonds was $21.8 million. The Company estimates its remaining payments to cover the principal and interest of these
bonds will be approximately $43.6 million.
Commitments
As of December 31, 2004, we had $786.3 million of long-term debt (including current maturities). This amount consisted primarily of the $343.2 million
government guaranteed loan, a secured term loan financing with General Electric Capital Corporation ("GECC"), of which $110.6 million remains
outstanding, $39.5 million principal amount of 10 3/4% senior unsecured notes, $112.3 million principal amount of 7.5% convertible senior notes (including
interest through December 31, 2004 as a deemed loan added to the principal thereof) and $252.7 million issue price of 7.25% senior exchangeable notes, of
which $86.8 million was received at issuance.
Government Guaranteed Loan
In January 2002, AWA closed a $429 million loan supported by a $380 million guarantee provided by the ATSB. Certain third-party counter-guarantors
have fully and unconditionally guaranteed the payment of an aggregate of $45 million of the outstanding principal amount under the government guaranteed
loan plus accrued and unpaid interest thereon. In addition, Holdings has fully and unconditionally guaranteed the payment of all principal, premium, interest
and other obligations outstanding under the government guaranteed loan and has pledged the stock of AWA to secure its obligations under such guarantee.
Principal amounts under this loan become due in ten installments of $42.9 million on each March 31 and September 30, commencing on March 31, 2004 and
ending on September 30, 2008. Principal amounts outstanding under the government guaranteed loan bear interest at a rate per annum equal to LIBOR plus 40
basis points.
Subject to certain exceptions, we are required to prepay the government guaranteed loan with:
• the net proceeds of all issuances of debt or equity by either Holdings or AWA after January 2002;
• proceeds from asset sales in excess of $20 million in any fiscal year; and
• insurance proceeds in excess of $2 million to the extent such proceeds are not used to restore or replace the assets from which such proceeds are
derived.
In addition, we are required to prepay the government guaranteed loan upon a change in control and we may be required to prepay portions of the loan if
our employee compensation costs exceed a certain threshold. We may, at our option, prepay the government guaranteed loan without premium or penalty,
subject to reimbursement of the lenders' breakage costs in the case of prepayment of LIBOR loans.
The government guaranteed loan requires that AWA maintain a minimum cash balance of $100 million. In addition, the government loan contains
customary affirmative covenants and the following negative covenants: restrictions on liens, investments, restricted payments, fundamental changes, asset
sales and acquisitions, the creation of new subsidiaries, sale and leasebacks, transactions with affiliates, the conduct of business, mergers or consolidations,
issuances and dispositions of capital stock of subsidiaries, and amendments to other indebtedness. The government guaranteed loan contains customary events
of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
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