US Airways 2009 Annual Report Download - page 63

Table of Contents
better than the credit ratings in effect on March 23, 2007, then (A) the applicable LIBOR margin will be 2.00% and (B) the applicable
index margin will be 1.00%. As of December 31, 2009, the interest rate on the Citicorp credit facility was 2.78% based on a 2.50%
LIBOR margin.
The Citicorp credit facility matures on March 23, 2014, and is repayable in seven annual installments with each of the first six
installments to be paid on each anniversary of the closing date in an amount equal to 1% of the initial aggregate principal amount of the
loan and the final installment to be paid on the maturity date in the amount of the full remaining balance of the loan.
In addition, the Citicorp credit facility requires certain mandatory prepayments upon the occurrence of specified events, establishes
certain financial covenants, including minimum cash requirements and maintenance of certain minimum ratios, contains customary
affirmative covenants and negative covenants and contains customary events of default. The Citicorp credit facility requires us to
maintain consolidated unrestricted cash and cash equivalents of not less than $850 million, 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. In
addition, the Citicorp credit facility amendment provides that we may issue debt in the future with a second lien on the assets pledged as
collateral under the Citicorp credit facility. The principal amount outstanding under the Citicorp credit facility was $1.17 billion as of
December 31, 2009. As of December 31, 2009, we were in compliance with all debt covenants under the amended credit facility.
7.25% Convertible Senior Notes
In May 2009, US Airways Group issued $172 million aggregate principal amount of 7.25% Convertible Senior Notes due 2014 (the
"7.25% notes") for proceeds, net of expenses, of approximately $168 million. The 7.25% notes bear interest at a rate of 7.25% per annum,
which shall be payable semi-annually in arrears on each May 15 and November 15. The 7.25% notes mature on May 15, 2014.
Holders may convert their 7.25% notes at their option at any time prior to the close of business on the second scheduled trading day
immediately preceding the maturity date for the 7.25% notes. Upon conversion, we will pay or deliver, as the case may be, cash, shares of
our common stock or a combination thereof at our election. The initial conversion rate for the 7.25% notes is 218.8184 shares of our
common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of $4.57 per share). Such conversion rate is
subject to adjustment in certain events.
If we undergo a fundamental change, holders may require us to purchase all or a portion of their 7.25% notes for cash at a price equal
to 100% of the principal amount of the 7.25% notes to be purchased plus any accrued and unpaid interest to, but excluding, the purchase
date. A fundamental change includes a person or group (other than us or our subsidiaries) becoming the beneficial owner of more than
50% of the voting power of our capital stock, certain merger or combination transactions, a substantial turnover of our directors,
stockholder approval of our liquidation or dissolution and US Airways Group common stock ceasing to be listed on at least one national
securities exchange.
The 7.25% notes rank equal in right of payment to all of our other existing and future unsecured senior debt and senior in right of
payment to our debt that is expressly subordinated to the 7.25% notes, if any. The 7.25% notes impose no limit on the amount of debt we
or our subsidiaries may incur. The 7.25% notes are structurally subordinated to all debt and other liabilities and commitments (including
trade payables) of our subsidiaries. The 7.25% notes are also effectively junior to our secured debt, if any, to the extent of the value of the
assets securing such debt.
As the 7.25% notes can be settled in cash upon conversion, for accounting purposes, the 7.25% notes were bifurcated into a debt
component that is initially recorded at fair value and an equity component. In addition to the 7.25% coupon interest, we expect to record
non-cash interest expense of $12 million in 2010, $16 million in 2011, $22 million in 2012, $29 million in 2013 and $13 million in 2014
representing the amortization of the discounted carrying value of the 7.25% notes to face value over the five-year term.
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