US Airways 2011 Annual Report Download - page 93

Table of Contents
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, the Company will pay or deliver, as the case may be, cash, shares of US Airways
Group common stock or a combination thereof at the Company's election. The initial conversion rate for the 7.25% notes is 218.8184 shares of US
Airways Group 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 the Company undergoes a fundamental change, holders may require the Company 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 the Company or its subsidiaries) becoming the beneficial owner of more than 50% of the
voting power of the Company's capital stock, certain merger or combination transactions, a substantial turnover of the Company's directors, stockholder
approval of the liquidation or dissolution of the Company and the Company's 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 the Company's other existing and future unsecured senior debt and senior in right of payment
to the Company's debt that is expressly subordinated to the 7.25% notes, if any. The 7.25% notes impose no limit on the amount of debt the Company
or its subsidiaries may incur. The 7.25% notes are structurally subordinated to all debt and other liabilities and commitments (including trade payables)
of the Company's subsidiaries. The 7.25% notes are also effectively junior to the Company's 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 was
initially recorded at fair value and an equity component. The following table details the debt and equity components recognized related to the 7.25%
notes (in millions):
December 31, December 31,
2011 2010
Principal amount of 7.25% convertible senior notes $ 172 $ 172
Unamortized discount on debt (63) (80)
Net carrying amount of 7.25% convertible senior notes 109 92
Additional paid-in capital 96 96
At December 31, 2011, the remaining period over which the unamortized discount will be recognized is 2.4 years.
The following table details interest expense recognized related to the 7.25% notes (in millions):
Year Ended December 31,
2011 2010 2009
Contractual coupon interest $ 12 $ 13 $ 8
Amortization of discount 17 12 6
Total interest expense $ 29 $ 25 $ 14
At December 31, 2011, the if-converted value of the 7.25% notes exceeded the principal amount by $19 million.
(g) 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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