US Airways 2008 Annual Report Download - page 146

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
margin, contain default and other covenants that are typical in the industry for similar financings, and are amortized over twelve years
with balloon payments at maturity.
On October 20, 2008, US Airways entered into a $270 million spare parts loan agreement and an $85 million engines loan agreement.
The proceeds of the term loans made under these loan agreements were used to repay a portion of the outstanding indebtedness of US
Airways Group under its Citicorp credit facility.
US Airways' obligations under the spare parts loan agreement are secured by a first priority security interest in substantially all of US
Airways' rotable, repairable and expendable aircraft spare parts. The obligations under the engines loan agreement are secured by a
first priority security interest in 36 of US Airways' aircraft engines. US Airways has also agreed that other obligations owed by it or
its affiliates to the administrative agent for the loan agreements or its affiliates (including the loans under these loan agreements held
by such administrative agent or its affiliates) will be secured on a second priority basis by the collateral for both loan agreements and
certain other engines and aircraft.
The term loans under these loan agreements will bear interest at a rate equal to LIBOR plus a margin per annum, subject to
adjustment in certain circumstances.
These loan agreements contain customary representations and warranties, events of default and covenants for financings of this
nature, including obligations to maintain compliance with covenants tied to the appraised value of US Airways' spare parts and the
appraised value and maintenance condition of US Airways' engines, respectively.
The spare parts loan agreement matures on the sixth anniversary of the closing date, and is subject to quarterly amortization in
amounts ranging from $8 million to $15 million. The spare parts loan agreement may not be voluntarily prepaid during the first three
years of the term; however, the loan agreement provided that in certain circumstances US Airways could prepay $100 million of the
loans under the agreement. The engines loan agreement, which may not be voluntarily prepaid prior to the third anniversary of the
closing date, matures on the sixth anniversary of the closing date, and is subject to amortization in 24 equal quarterly installments.
On December 5, 2008, US Airways prepaid $100 million of principal outstanding under the spare parts loan agreement. In connection
with this prepayment and pursuant to an amendment to the spare parts loan agreement, subject to certain conditions, US Airways
obtained the right to incur up to $100 million in new loans. The right to incur new loans expires on April 1, 2009.
(b) The equipment notes underlying the EETCs are the direct obligations of US Airways and cover the financing of 19 aircraft. See
Note 8(c) for further discussion.
(c) In September 2005, US Airways entered into an agreement with Republic to sell and leaseback certain of its commuter slots at
Ronald Reagan Washington National Airport and New York LaGuardia Airport. US Airways continues to hold the right to
repurchase the slots anytime after the second anniversary of the slot sale-leaseback transaction. These transactions were accounted for
as secured financings. Installments are due monthly through 2015. In December 2006, Republic and US Airways modified terms of
the agreement to conform to subsequent regulatory changes at LaGuardia, and the LaGuardia slots were returned to US Airways. The
need for a subsequent modification was fully contemplated in the original agreement.
(d) Capital lease obligations consist principally of certain airport maintenance and facility leases which expire in 2018 and 2021.
(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 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.
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