US Airways 2005 Annual Report Download - page 86

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Group, AWA and US Airways. Low credit ratings could cause our borrowing costs to increase, which would increase our interest expense and could affect
our net income, and our credit ratings could adversely affect our ability to obtain additional financing. The rating agencies base their ratings on their
expectations regarding the merger, our financial performance and operations, our cash flow and liquidity, the level of our indebtedness and industry
conditions in general. If our financial performance or industry conditions do not improve, we may face future downgrades, which could further negatively
impact our borrowing costs and the prices of our equity or debt securities. In addition, any downgrade of our credit ratings may indicate a decline in our
business and in our ability to satisfy our obligations under our indebtedness.
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 $111 million. AWA used
approximately $77 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 $76 million term loan facility secured primarily by spare parts, rotables and appliances (the "Spare Parts Facility"); and a
$35 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 million beginning on March 10, 2006 through June 10, 2010, with the remaining loan amount of $12 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 in 2004 when AWA refinanced its term loan. Using its leasehold
interests in these two facilities as collateral, AWA, through a subsidiary named FTCHP LLC, raised $31 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 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 $2 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 $2 million on the third and fourth 80