US Airways 2008 Annual Report Download - page 65

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unrestricted cash and cash equivalents of not less than $1.25 billion, with not less than $750 million (subject to partial reductions upon
certain reductions in the outstanding principal amount of the loan) of that amount held in accounts subject to control agreements, which
would become restricted for use by us if certain adverse events occur per the terms of the agreement.
On October 20, 2008, US Airways Group entered into an amendment to the Citicorp credit facility. Pursuant to the amendment, we
repaid $400 million of indebtedness under the credit facility, reducing the principal amount outstanding under the credit facility to
approximately $1.18 billion as of December 31, 2008. The Citicorp credit facility amendment also provides for a reduction in the amount
of unrestricted cash required to be held by us from $1.25 billion to $850 million, and we may, prior to September 30, 2009, further reduce
that minimum requirement to a minimum of $750 million on a dollar-for-dollar basis for any additional repayments of up to $100 million
of indebtedness under the credit facility. The Citicorp credit facility amendment also provides that we may sell, finance or otherwise
pledge assets that were pledged as collateral under the credit facility, so long as we prepay the indebtedness under the credit facility in an
amount equal to 75% of the appraised value of the collateral sold or financed or assigned or 75% of the collateral value of eligible
accounts (determined in accordance with the credit facility) sold or financed in such transaction. In addition, the Citicorp credit facility
amendment provides that we may issue debt in the future with a silent second lien on the assets pledged as collateral under the Citicorp
credit facility. As of December 31, 2008, we were in compliance with all debt covenants under the amended credit facility.
Credit Card Processing Agreements
We have agreements with companies that process customer credit card transactions for the sale of air travel and other services.
Credit card processors have financial risk associated with tickets purchased for travel because, although the processor generally forwards
the cash related to the purchase to us soon after the purchase is completed, the air travel generally occurs after that time, and the processor
may have liability if we do not ultimately provide the air travel. Our agreements allow these processing companies, under certain
conditions, to hold an amount of our cash (referred to as a "holdback") equal to a portion of advance ticket sales that have been processed
by that company, but for which we have not yet provided the air transportation. These holdback requirements can be modified at the
discretion of the processing companies, up to the estimated liability for future air travel purchased with the respective credit cards, upon
the occurrence of specified events, including material adverse changes in our financial condition. The amount that the processing
companies may withhold also varies as a result of changes in financial risk due to seasonal fluctuations in ticket volume. Additional
holdback requirements will reduce our liquidity in the form of unrestricted cash and short-term investments by the amount of the
holdbacks.
October 2008 Financing Transactions
On October 20, 2008, we completed a series of financial transactions which raised approximately $810 million in gross proceeds.
Below is a discussion of the significant transactions comprising this amount.
Effective as of October 20, 2008, US Airways Group entered into an amendment to its co-branded credit card agreement with
Barclays Bank Delaware. The amendment provides for, among other things, the pre-purchase of frequent flyer miles in an amount
totaling $200 million, which amount was paid by Barclays in October 2008. The amendment also provides that so long as any pre-
purchased miles are outstanding, we will pay interest to Barclays on the outstanding dollar amount of the pre-purchased miles at the rate
of LIBOR plus a margin.
The amendment to the co-branded credit card agreement provides that Barclays will compensate us for fees earned using pre-
purchased miles. In addition, the amendment provides that for each month that certain conditions are met, Barclays will pre-purchase
additional miles on a monthly basis in an amount equal to the difference between $200 million and the amount of unused miles then
outstanding. The conditions include a requirement that we maintain an unrestricted cash balance, subject to certain circumstances, of at
least $1.5 billion each month, which was reduced to $1.4 billion for January 2009 and $1.45 billion for February 2009, with the
unrestricted cash balance in all cases including certain fuel hedge collateral. The reductions addressed the impact on our unrestricted cash
of our obligations to post significant amounts of collateral with our fuel hedging counterparties due to recent rapid declines in fuel prices.
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