United Airlines 2007 Annual Report Download - page 127

UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(12) Debt Obligations (Continued)
2007 Financing Transactions
Amended Credit Facility. In February 2007, the Company prepaid $972 million of its credit facility debt (see 2006 Debt Transactions, below) and entered
into an amended and restated revolving credit, term loan and guaranty agreement (the "Amended Credit Facility") that, among other things, reduced the size of
the facility from $3.0 billion to $2.055 billion, reduced the applicable interest rates, and provided for a more limited collateral package and a relaxation of certain
restrictive covenants. There were no prepayment penalties associated with this debt retirement. In addition, United also incurred financing costs of $10 million of
which $6 million was expensed and $4 million was capitalized. The financing costs associated with the credit facility amendment and prepayment, which were
expensed, are classified within interest expense. The Company expensed approximately $17 million of deferred financing costs which are related to the portion
of the credit facility prepaid in February 2007 and included in other assets on the December 31, 2006 Statements of Consolidated Financial Position.
In addition, in December 2007 the Company prepaid an additional $500 million of the term loan under the Amended Credit Facility. In connection with this
prepayment, the Company expensed an additional $6 million of previously capitalized debt issuance costs. The Company also recognized a $2 million credit to
interest expense to recognize previously deferred interest rate swap gains.
The December 2007 amendment enabled the Company to undertake certain shareholder initiatives. UAL's Board of Directors approved a special distribution
of $2.15 per share to holders of UAL common stock, or approximately $257 million, which was paid on January 23, 2008. The Company can undertake
approximately $243 million in additional shareholder initiatives without any additional prepayment of the Amended Credit Facility. The amendment also
provides that the Company can carry out further shareholder initiatives in an amount equal to future term loan prepayments.
The Amended Credit Facility provided for a total commitment of up to $2.055 billion, comprised of two separate tranches: (i) a Tranche A consisting of
$255 million revolving commitment available for Tranche A loans and standby letters of credit and (ii) a Tranche B consisting of a term loan commitment of
$1.8 billion available at the time of closing. The Tranche A loans mature on February 1, 2012, and the Tranche B loans mature on February 1, 2014.
Borrowings under the Amended Credit Facility bear interest at a floating rate, which, at the Company's option, can be either a base rate or a LIBOR rate,
plus an applicable margin of 1.0% in the case of base rate loans, and 2.0% in the case of LIBOR loans. The Tranche B term loan requires regularly scheduled
semi-annual payments of principal equal to $9 million. Interest is payable at least every three months. The Company may prepay some or all of the Tranche B
loans from time to time, at a price equal to 100% of the principal amount prepaid plus accrued and unpaid interest, if any, to the date of prepayment, but without
penalty or premium. In addition, letters of credit issued under the credit facility as of December 31, 2007 in an aggregate amount of $102 million were subject to
a fee at the rate of 2.0% per annum.
United's obligations under the Amended Credit Facility are unconditionally guaranteed by UAL Corporation and certain of its direct and indirect domestic
subsidiaries, other than certain immaterial subsidiaries (the "Guarantors"). On the closing date for the Amended Credit Facility, the obligations are secured by a
security interest in the following tangible and intangible assets of United and the Guarantors: (i) the Pacific (Narita, China and Hong Kong) and Atlantic
(Heathrow) routes (the "Primary Routes") that United had as of February 2, 2007, (ii) primary foreign slots, primary domestic
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008