US Airways 2006 Annual Report Download - page 62

Table of Contents
Conversion of 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. 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 was 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 were scheduled to mature on January 18, 2009 unless earlier converted or redeemed. 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.
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 the 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. As of December 31, 2006 there were no 7.5% Convertible Senior
Notes outstanding.
7% Senior Convertible Notes
US Airways Group received net proceeds of $139 million related to the 7% Senior Convertible Notes due 2020 that were issued on
September 30, 2005. The 7% notes are US Airways Group's senior unsecured obligations and rank equally in right of payment to its other
senior unsecured and unsubordinated indebtedness, and are effectively subordinated to its secured indebtedness to the extent of the value
of assets securing such indebtedness. The 7% notes are fully and unconditionally guaranteed, jointly and severally and on a senior
unsecured basis, by US Airways and AWA. The US Airways and AWA guarantees are the guarantors' unsecured obligations, rank
equally in right of payment to the other senior unsecured and unsubordinated indebtedness of the guarantors and are effectively
subordinated to the guarantors' secured indebtedness to the extent of the value of assets securing such indebtedness.
The 7% notes bear interest at the rate of 7% per year payable in cash semiannually in arrears on March 30 and September 30 of each
year, beginning March 30, 2006. The 7% notes mature on September 30, 2020. Holders may convert, at any time on or prior to maturity
or redemption, any outstanding notes (or portions thereof) into shares of US Airways Group's common stock, initially at a conversion rate
of 41.4508 shares of US Airways Group's common stock per $1,000 principal amount of 7% notes (equivalent to an initial conversion
price of approximately $24.12 per share of US Airways Group's common stock). If a holder elects to convert its 7% notes in connection
with certain specified fundamental changes that occur prior to October 5, 2015, the holder will be entitled to receive additional shares of
US Airways Group's common stock as a make whole premium upon conversion. In lieu of delivery of shares of US Airways Group's
common stock upon conversion of all or any portion of the 7% notes, US Airways Group may elect to pay holders surrendering 7% notes
for conversion cash or a combination of shares and cash.
Holders of the 7% notes may require US Airways Group to purchase for cash or shares or a combination thereof, at US Airways
Group's election, all or a portion of their notes on September 30, 2010 and September 30, 2015 at a purchase price equal to 100% of the
principal amount of the notes to be repurchased plus accrued and unpaid interest, if any, to the purchase date. In addition, if US Airways
Group experiences a fundamental change (as defined in the indenture governing the notes), holders may require US Airways Group to
purchase for cash, shares or a combination thereof, at its election, all or a portion of their notes, subject to specified exceptions, at a price
equal to 100% of the principal amount of the notes plus accrued and unpaid interest, if any, to the purchase date.
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