US Airways 2007 Annual Report Download - page 94

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
(e) 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 interest in these two facilities as collateral, AWA, through a wholly owned
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 the Company, 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
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. As part of the transfer of substantially all of
AWA's assets and liabilities to US Airways in connection with the combination of all mainline airline operations under one FAA
operating certificate on September 26, 2007, AWA assigned its subleases for the facilities with FTCHP to US Airways. In
addition, US Airways assumed all of the obligations of AWA in connection with the financing and joined the guarantee of the
payment and performance of FTCHP's obligations under the notes and the loan agreement.
(f) On September 30, 2005, US Airways Group issued $144 million aggregate principal amount of 7% Senior Convertible Notes due
2020 (the "7% Senior Convertible Notes") for proceeds, net of expenses, of approximately $139 million. The 7% Senior
Convertible 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% Senior Convertible Notes are fully and unconditionally guaranteed, jointly and
severally and on a senior subordinated basis, by US Airways and AWA. The guarantees are the guarantors' unsecured obligations
and 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% Senior Convertible 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% Senior Convertible 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 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 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
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