US Airways 2005 Annual Report Download - page 136

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
market value on the date of issuance. The balance at December 31, 2005 is net of an unamortized discount of $18 million.
(l) In July and August of 2003, AWA completed a private placement of approximately $87 million issue price of 7.25% Senior Exchangeable Notes due
2023. The notes bore cash interest at a rate of 2.49% per year, and were redeemable or exchangeable under certain conditions. Completion of the
merger between US Airways Group and America West Holdings on September 27, 2005 constituted a "change of control" under these notes and
required AWA to make an offer to holders to purchase those notes within 30 business days after the effective time of the merger at a purchase price of
$343.61 per $1,000 principal amount at maturity. Under the terms of the notes and the related Guarantee and Exchange Agreement, dated as of July 30,
2003, between America West Holdings and U.S. Bank National Association, as Trustee, as supplemented by the Guarantee and Exchange Agreement
Supplement No. 1 among America West Holdings, US Airways Group and the Trustee, dated as of September 27, 2005, AWA's obligation to purchase
the notes was satisfied at US Airways Group's election by delivery of shares of US Airways Group common stock having a "fair market value" of not
less than $343.61 per $1,000 principal amount at maturity. For this purpose, "fair market value" means 95% of the market price of US Airways Group
common stock calculated as the average closing prices over the five business days ending on and including the third business day before the purchase
date.
On October 24, 2005, US Airways Group issued a total of 4,156,411 shares of its common stock in exchange for approximately $250 million in
principal amount at maturity of AWA's Senior Exchangeable Notes due 2023, which notes were fully and unconditionally guaranteed by US Airways
Group. The shares were exchanged at a rate of 16 shares of US Airways Group common stock per $1,000 principal amount at maturity, in full
satisfaction of the purchase price of the notes. The amount of notes exchanged represented approximately 99% of the outstanding principal amount, and
approximately $2 million in principal amount at maturity of the notes remained outstanding after the exchange. On November 30, 2005, US Airways
Group issued a total of 38,864 shares of its common stock to repurchase the remaining outstanding principal amount of the notes.
(m) The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually on April 1 and October 1. The bonds are
subject to optional redemption prior to the maturity date on or after April 1, 2008, in whole or in part, on any interest payment date at the following
redemption prices: 102% on April 1 or October 1, 2008; 101% on April 1 or October 1, 2009; and 100% on April 1, 2010 and thereafter.
(n) In connection with the merger, AWA, US Airways Group and Juniper, entered into an agreement on August 8, 2005 amending AWA's co-branded
credit card agreement with Juniper, dated January 25, 2005. Pursuant to the amended credit card agreement, Juniper agreed to offer and market an
airline mileage award credit card program to the general public to participate in US Airways Group's Dividend Miles program through the use of a co-
branded credit card.
US Airways Group's credit card program is currently administered by Bank of America, N.A. (USA). On December 28, 2005, US Airways issued a
notice of termination under its agreement with Bank of America and that notice will become effective on December 28, 2007. Pending termination of
the Bank of America agreement, both Juniper and Bank of America will run separate credit card programs for US Airways Group. The amended credit
card agreement is the subject of pending litigation filed by Bank of America against US Airways Group, US Airways and AWA (See Note 12(d)).
The amended credit card agreement took effect at the effective time of the merger. The credit card services provided by Juniper under the amended
credit card agreement began in January 2006, and will continue until the expiration date, which is the later of December 31, 2012 or seven years from
the date on which Juniper commences marketing to the general public. 130