United Airlines 2007 Annual Report Download - page 132

UAL Corporation and Subsidiary Companies
Combined Notes to Consolidated Financial Statements (Continued)
(12) Debt Obligations (Continued)
issuance, which approximated the book value of the original extinguished notes, and no gain or loss was realized on the extinguishment. The Company had
recorded the original obligation to issue the Limited-Subordination Notes at fair market value upon its emergence from bankruptcy in accordance with fresh-start
reporting.
After the issuance of the modified notes in July 2006, the trusts sold the notes to third parties and remitted the proceeds to the employee beneficiaries.
5% senior convertible notes. On the Effective Date, UAL issued these notes to certain holders of the O'Hare municipal bonds on the Effective Date. The
notes are unsecured, have a term of 15 years from the date of issuance and do not require any payment of principal before maturity. Interest is payable
semi-annually, in arrears. These 5% senior convertible notes may be converted, at the holder's option, into Successor UAL common stock at any time at an initial
conversion price of $46.86. Effective January 10, 2008, the conversion price was adjusted to $43.90 due to the UAL special distribution to holders of Successor
UAL common stock on January 23, 2008. This conversion price is subject to adjustment for certain dilutive items and events. These notes are callable, at UAL's
option, in cash or Successor UAL common stock, under certain conditions, beginning five years after the issuance date. In the case of any such redemption, the
Company may only redeem these notes with shares of common stock if Successor UAL common stock has traded at no less than 125% of the conversion price
for the 60 consecutive trading days prior to the redemption date. The holders have the option to require UAL to repurchase their notes on the 5th and
10th anniversary of the date of issuance, which UAL may elect to do through the payment of cash, common stock or a combination of both.
6% senior notes. On the Effective Date, UAL issued these notes to the PBGC. These notes are unsecured, mature 25 years from the issuance date and do
not require any payment of principal before maturity. Interest is payable semi-annually, in arrears. Interest may be paid with cash, in kind notes or Successor
UAL common stock through 2011 and thereafter in cash. These notes are callable at any time at 100% of par value, and can be redeemed with either cash or
Successor UAL common stock at UAL's option. Upon a change in control or other event as defined in the agreement, UAL has an obligation to redeem the notes.
In the case of such mandatory redemption, UAL may elect to redeem the notes in cash, in shares of Successor UAL common stock or a combination thereof.
Contingent Senior Unsecured Notes. In addition to the debt issued as noted above, UAL is obligated to issue to the PBGC 8% senior unsecured notes with
an aggregate $500 million principal amount in up to eight equal tranches of $62.5 million (with no more than two tranches issued on a single date) upon the
occurrence of certain financial triggering events. Any required tranche will be issued no later than 45 days following the end of any fiscal year in which there is
an issuance trigger event, starting with the fiscal year ending December 31, 2009 and ending with the fiscal year ending December 31, 2017. An issuance trigger
event occurs when, among other things, the Company's EBITDAR exceeds $3.5 billion over the prior twelve months ending June 30 or December 31 of any
applicable fiscal year, beginning with the fiscal year ending December 31, 2009. However, if the issuance of a tranche would cause a default under any other
securities then existing, UAL may satisfy its obligations with respect to such tranche by issuing Successor UAL common stock having a market value equal to
$62.5 million. Each issued tranche will mature 15 years from its respective issuance date, with interest payable in cash in semi-annual installments, and will be
callable at any time at 100% of par value, plus accrued and unpaid interest.
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Source: UNITED AIR LINES INC, 10-K, February 29, 2008