US Airways 2009 Annual Report Download - page 91

Table of Contents
consideration of aircraft deliveries under the various related purchase agreements. Under the terms of each of the amendments, US
Airways has agreed to maintain a level of unrestricted cash in the same amount required by the Citicorp credit facility. This
transaction was treated as a financing transaction for accounting purposes using an effective interest rate commensurate with US
Airways' credit rating. There are no stated interest payments.
(i) On September 30, 2005, US Airways Group issued $144 million aggregate principal amount of the 7% notes for net proceeds of
approximately $139 million. The 7% notes are the Company'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 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% 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 prior to the earlier of the business day prior to the redemption date and the second business day
preceding the maturity date, any outstanding notes (or portions thereof) into shares of US Airways Group common stock, at an
initial conversion rate of 41.4508 shares of US Airways Group common stock per $1,000 principal amount of notes (equivalent to
an initial conversion price of $24.12 per share). 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 common stock as a make-whole premium upon conversion. In lieu of delivery of shares of US Airways Group common
stock upon conversion of all or any portion of the notes, the Company may elect to pay holders surrendering notes for conversion,
cash or a combination of shares and cash.
Holders may require the Company to purchase for cash or shares or a combination thereof, at the Company's election, all or a
portion of their 7% notes on September 30, 2010 and September 30, 2015 at a purchase price equal to 100% of the principal amount
of the 7% notes to be repurchased plus accrued and unpaid interest, if any, to the purchase date. In addition, if the Company
experiences a specified fundamental change, holders may require the Company to purchase for cash, shares or a combination
thereof, at its election, all or a portion of their 7% notes, subject to specified exceptions, at a price equal to 100% of the principal
amount of the 7% notes plus accrued and unpaid interest, if any, to the purchase date. Prior to October 5, 2010, the 7% notes will
not be redeemable at the Company's option. The Company may redeem all or a portion of the 7% notes at any time on or after
October 5, 2010, at a price equal to 100% of the principal amount of the 7% notes plus accrued and unpaid interest, if any, to the
redemption date if the closing price of US Airways Group common stock has exceeded 115% of the conversion price for at least 20
trading days in the 30 consecutive trading day period ending on the trading day before the date on which the Company mails the
optional redemption notice.
In 2006, $70 million of the $144 million outstanding principal amount was converted into 2,909,636 shares of common stock. In
connection with the conversion, the Company paid a premium of $17 million to the holders of the converted notes, which was
recorded in other nonoperating expenses.
As the 7% notes can be settled in cash upon conversion, for accounting purposes, the 7% notes were bifurcated into a debt
component that was initially recorded at fair value and an equity component. The following table details the debt and equity
components recognized related to the 7% notes (in millions):
December 31, December 31,
2009 2008
Principal amount of 7% senior convertible notes $ 74 $ 74
Unamortized discount on debt (5) (11)
Net carrying amount of 7% senior convertible notes 69 63
Additional paid-in capital 40 40
89