US Airways 2004 Annual Report Download - page 87

Table of Contents
AMERICA WEST AIRLINES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
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.
(b) 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 interest 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 AWA, 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 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.
(c) In January 2002, AWA closed a $429 million loan backed by a $380 million federal loan guarantee provided by the Air Transportation Stabilization Board
(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, AWA is 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, AWA is 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. AWA may, at its 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 84