US Airways 2005 Annual Report Download - page 87

Table of Contents
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 $11 million from operating cash flow, were irrevocably deposited with the trustee for AWA's
103/4% senior unsecured notes due 2005, which were subsequently redeemed on January 26, 2005. AWA issued $75 million principal amount of the
103/4% senior unsecured notes in August 1995, of which $40 million remained outstanding at December 31, 2004. Interest on the 103/4% senior unsecured
notes was payable semiannually in arrears on March 1 and September 1 of each year.
7.5% Convertible Senior Notes due 2009
In connection with the closing of AWA's original ATSB loan and the related transactions in January 2002, America West Holdings issued $105 million of
7.5% convertible senior notes due 2009, of which approximately $112 million remained outstanding at December 31, 2005. The outstanding amount includes
$22 million of interest paid through December 31, 2005 as a deemed loan added to the principal of the notes. Beginning January 18, 2005, these notes became
convertible into shares of common stock, at the option of the holders, at an initial conversion price of $29.09 per share or a conversion ratio of approximately
34.376 shares per $1,000 principal amount of such notes, subject to standard anti-dilution adjustments. Interest on the 7.5% convertible senior notes is payable
semiannually in arrears on June 1 and December 1 of each year. At America West Holdings' option, the first six interest payments were payable in the form of
a deemed loan added to the principal amount of these notes. The 7.5% convertible senior notes mature on January 18, 2009 unless earlier converted or
redeemed. The payment of principal, premium and interest on the 7.5% convertible senior notes is fully and unconditionally guaranteed by AWA and
US Airways Group.
America West Holdings may redeem 7.5% convertible senior notes, in whole or in part, at the following redemption prices (which are expressed as
percentages of the principal amount of the notes), if redeemed during the twelve-month period commencing on January 18 of the years set forth below, plus,
in each case, accrued and unpaid interest, if any, to the date of redemption:
Year Redemption Price
2005 103.75%
2006 102.50%
2007 101.25%
2008 and thereafter 100.00%
Off-Balance Sheet Arrangements
An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a
company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as
equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides
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