US Airways 2006 Annual Report Download - page 107

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
In 2006, $70 million of the $144 million outstanding principal amount was converted into 2,909,636 shares of common stock. In
connection with the conversion, the Company paid a premium of $17 million to the holders of the converted notes, which was
recorded in other nonoperating expenses.
(h) In January 2002, in connection with the closing of the original AWA ATSB loan and the related transactions, 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 (including $22 million of interest paid through December 31, 2004 as a deemed loan added to
the initial principal thereof). Beginning January 18, 2005, these notes were convertible into shares of common stock of
US Airways Group, 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. The
payment of principal, premium and interest on the 7.5% convertible senior notes was fully and unconditionally guaranteed by
AWA and US Airways Group. For financial reporting purposes, America West Holdings recorded the convertible senior notes at
their fair market value on the date of issuance. The balance at December 31, 2005 was net of an unamortized discount of
$18 million.
On March 24, 2006, America West Holdings gave notice to the holders of the 7.5% convertible senior notes that it was redeeming
the notes in full, at a redemption price of 102.50% of the principal amount of the notes, as required under the terms of the
indenture, plus accrued and unpaid interest up to, but not including, the date of redemption. The redemption price, plus the
relevant interest, was $1,052.50 per $1,000 principal amount of the notes, and the redemption date was April 13, 2006. Holders
had the right, at any time at or prior to the close of business on April 11, 2006, to convert the notes into shares of common stock of
US Airways Group at a price of $29.09 per share, or 34.376 shares per $1,000 principal amount. Holders who converted also
received interest up to the date of conversion. A total of $112 million in principal amount of the notes was converted into shares of
common stock prior to the redemption date, resulting in the issuance of 3,860,358 shares of common stock. In connection with the
conversion of the notes into common stock, the associated unamortized discount of $17 million was recorded as a reduction in the
amount of paid in capital for the conversion.
(i) In December 2004, deferred charges under US Airways' maintenance agreements with GE Engine Systems, Inc. were converted
into a $54 million unsecured term note. The original note balance of $54 million was reduced by a credit of $9.4 million as a result
of the merger. Interest on the note accrues at LIBOR plus 4%, and becomes payable beginning in January 2008, at which time
principal and interest payments are due in 48 monthly installments.
(j) 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.
(k) In connection with the merger, AWA, US Airways Group and Juniper Bank, a subsidiary of Barclays PLC ("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 was also administered by Bank of America, N.A. (USA) prior to the merger. 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 10(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
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