United Airlines 2008 Annual Report Download - page 128

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 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.
Amended Credit Facility Collateral. 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 February 2, 2007, the
closing date of the Amended Credit Facility, the obligations were 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 slots, certain gate interests in domestic airport
terminals and certain supporting route facilities, (iii) certain spare engines, (iv) certain quick engine
change kits, (v) certain owned real property and related fixtures, and (vi) certain flight simulators (the
“Collateral”). After the closing date, and subject to certain conditions, United and the Guarantor were
able to grant a security interest in the following assets, in substitution for certain Collateral (which may
be released from the lien in support of the Amended Credit Facility upon the satisfaction of certain
conditions): (a) certain aircraft, (b) certain spare parts, (c) certain ground handling equipment and
(d) accounts receivable. In addition, United had the right to remove collateral pledged to the Amended
Credit Facility as long as the minimum collateral ratio described below is achieved.
In March 2008, in accordance with the terms of its the Amended Credit Facility, United provided
notice to the lenders of its intent to remove certain assets from the collateral securing its outstanding
loans. The release of such collateral was effective as of April 16, 2008. The release of collateral, which
was valued at approximately $650 million, was facilitated, in part, by the reduction in outstanding loans
under the Amended Credit Facility following United’s $500 million prepayment in December 2007.
United’s assets released from the Amended Credit Facility collateral included all domestic slots, spare
engines, flight simulators, owned real property and related fixtures previously securing the Amended
Credit Facility. Following such release of collateral, the Amended Credit Facility is secured by certain of
United’s international route authorities, international slots, related gate interests and associated rights.
Amended Credit Facility Covenants. The Amended Credit Facility contains covenants that in certain
circumstances may limit the ability of United and the Guarantors to, among other things, incur or
guarantee additional indebtedness, create liens, pay dividends on or repurchase stock, make certain types
of investments, enter into transactions with affiliates, sell assets or merge with other companies, modify
corporate documents or change lines of business. The Company was in compliance with all of its
Amended Credit Facility covenants as of December 31, 2008 and 2007. In May 2008, the Company
amended the terms of certain financial covenants of the Amended Credit Facility. The Company paid
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