US Airways 2010 Annual Report Download - page 88

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Table of Contents
At December 31, 2010, the if-converted value of the 7.25% notes exceeded the principal amount by $205 million.
(g) Prior to September 30, 2010, the Company had outstanding $74 million principal amount of 7% notes. Holders had the right to
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 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. As of September 30, 2010, $69 million of the 7% notes outstanding were
validly surrendered for purchase and the Company paid $69 million in cash to satisfy the aggregate repurchase price. The principal
amount of the remaining 7% notes outstanding as of December 31, 2010 was $5 million.
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, 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. 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.
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,
2010 2009
Principal amount of 7% senior convertible notes $ 5 $ 74
Unamortized discount on debt — (5)
Net carrying amount of 7% senior convertible notes 5 69
Additional paid-in capital 40 40
The following table details interest expense recognized related to the 7% notes (in millions):
Year Ended December 31,
2010 2009 2008
Contractual coupon interest $ 4 $ 5 $ 5
Amortization of discount 5 6 5
Total interest expense $ 9 $ 11 $ 10
At December 31, 2010, the if-converted value of the 7% notes did not exceed the principal amount.
(h) The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually on April 1 and October 1.
The bonds are subject to optional redemption prior to the maturity date, in whole or in part, on any interest payment date at a
redemption price of 100%.
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