US Airways 2004 Annual Report Download - page 36

Table of Contents
GECC Term Loan Financing
On September 10, 2004, AWA entered into a term loan financing with GECC providing for loans in an aggregate amount of $110.6 million. AWA used
approximately $77.0 million of the proceeds from this financing to repay in full its term loan with Mizuho Corporate Bank, Ltd. and certain other lenders and
to pay certain costs associated with this transaction. AWA used the remaining proceeds for general corporate purposes. The new term loan financing consists
of two secured term loan facilities: a $75.6 million term loan facility secured primarily by spare parts, rotables and appliances (the "Spare Parts Facility"); and
a $35.0 million term loan facility secured primarily by aircraft engines and parts installed in such engines (the "Engine Facility").
The facilities are cross-collateralized on a subordinated basis and the collateral securing the facilities also secures on a subordinated basis certain of AWA's
other existing debt and lease obligations to GECC and its affiliates.
The loans under the Spare Parts Facility are payable in full at maturity on September 10, 2010. The loans under the Engine Facility are payable in equal
quarterly installments of $1.3 million beginning on March 10, 2006 through June 10, 2010 with the remaining loan amount of $11.8 million payable at
maturity on September 10, 2010. The loans under each facility may be prepaid in an amount not less than $5 million at any time after the 30th monthly
anniversary of the funding date under such facility. If AWA fails to maintain a certain ratio of rotables to loans under the Spare Parts Facility, it may be
required to pledge additional rotables or cash as collateral, provide a letter of credit or prepay some or all of the loans under the Spare Parts Facility. In
addition, the loans under the Engine Facility are subject to mandatory prepayment upon the occurrence of certain events of loss applicable to, or certain
dispositions of, aircraft engines securing the facility.
Principal amounts outstanding under the loans bear interest at a rate per annum based on three-month LIBOR plus a margin. Both facilities contain
customary events of default, including payment defaults, cross-defaults, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
Senior Secured Discount Notes Due 2009
On December 27, 2004, AWA raised additional capital by financing its Phoenix maintenance facility and flight training center. The flight training center
was previously unencumbered, and the maintenance facility became unencumbered earlier this year when AWA refinanced its term loan. Using its leasehold
interests in these two facilities as collateral, AWA, through a wholly owned subsidiary named FTCHP LLC, raised $30.8 million through the issuance of
senior secured discount notes. The notes were issued by FTCHP at a discount pursuant to the terms of a senior secured term loan agreement among the
Company, FTCHP, Heritage Bank, SSB, as administrative agent, Citibank, N.A., as the initial lender, and the other lenders from time to time party thereto.
Citibank, N.A. subsequently assigned all of its interests in the notes to third party lenders.
AWA has fully and unconditionally guaranteed the payment and performance of FTCHP's obligations under the notes and the loan agreement. The notes
require aggregate principal payments of $36.0 million with principal payments of $1.5 million due on each of the first two anniversary dates and the
remaining principal amount due on the fifth anniversary date. The notes may be prepaid in full at any time (subject to customary LIBOR breakage costs) and
in partial amounts of $1.5 million on the third and fourth anniversary dates. The unpaid principal amount of the notes bears interest based on LIBOR plus a
margin subject to adjustment based on a loan to collateral value ratio.
The loan agreement contains customary covenants applicable to loans of this type, including obligations relating to the preservation of the collateral and
restrictions on the activities of FTCHP. In addition, the loan agreement contains events of default, including payment defaults, cross-defaults to other debt of
FTCHP, if any, breach of covenants, bankruptcy and insolvency defaults and judgment defaults.
In connection with this financing, AWA sold all of its leasehold interests in the maintenance facility and flight training center to FTCHP and entered into
subleases for the facilities with FTCHP at lease rates expected to approximate the interest payments due under the notes. In addition, AWA agreed to make
future capital contributions to FTCHP in amounts sufficient to cover principal payments and other amounts owing pursuant to the notes and the loan
agreement.
The proceeds from this financing, together with $10.5 million from operating cash flow, were irrevocably deposited with the trustee for AWA's 10-3/4%
senior unsecured notes due 2005 and subsequently redeemed on January 26, 2005.
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