United Airlines 2009 Annual Report Download - page 61

Table of Contents
Other Financing Matters
Secured Notes Offering. In January 2010, the Company issued $500 million aggregate principal amount of 9.875% Senior Secured Notes due 2013 (the
“Senior Secured Notes”) and $200 million aggregate principal amount of 12.0% Senior Second Lien Notes due 2013 (the “Senior Second Lien Notes”). The
Senior Secured Notes and Senior Second Lien Notes are secured by United’s route authority to operate between the United States and Japan and beyond Japan to
points in other countries, certain airport takeoff and landing slots and airport gate leaseholds utilized in connection with these routes. Among other covenants, the
indentures governing the Senior Secured Notes and the Senior Second Lien Notes contain covenants related to the collateral, including covenants requiring
United, subject to certain exceptions, to maintain ownership of the collateral and to calculate the priority lien debt value ratio or secured debt value ratio, as
applicable, and to maintain a minimum priority lien debt value ratio or minimum secured debt value ratio, as applicable, as of certain reference periods.
EETC Financing. In January 2010, the Company issued the remaining principal amount of the equipment notes relating to the Series 2009-1 and 2009-2
EETCs, as discussed in 2009 Activity, above. Issuance proceeds of approximately $1.1 billion were used to repay the Series 2000-2 and 2000-1 EETCs and for
general corporate purposes. The issuance of the 2009 EETCs resulted in a reduction in the Company’s 2010 and 2011 debt obligations of approximately $440
million and $275 million, respectively. These financing activities resulted in approximately $250 million of incremental liquidity in 2010.
Encumbered Assets. As of December 31, 2009 and 2008, a substantial portion of the Company’s assets, principally aircraft, spare engines, aircraft spare
parts, route authorities and Mileage Plus intangible assets were pledged under various loan and other agreements. In January 2010, the Company completed a
debt offering secured by United’s route authorities to operate between the United States and Japan and beyond Japan to points in other countries, certain airport
takeoff and landing slots and airport gate leaseholds utilized in connection with these routes. As a part of the offering, United requested that these assets,
currently encumbered under the Amended Credit Facility, be released and substituted by replacement collateral consisting of aircraft, spare engines, primary slots
at LaGuardia and Washington Reagan and flight simulators with an appraised value of approximately $830 million. After the assets are released from the
Amended Credit Facility in April 2010, a balance of approximately $200 million in unencumbered assets will remain. In addition, the Amended Credit Facility
will include approximately $300 million of excess collateral that can be used for financing if needed, subject to approval from the Amended Credit Facility
lenders. See Note 11, “Debt Obligations and Card Processing Agreements,” in the Footnotes for additional information on assets provided as collateral by the
Company.
Future Financing. Subject to the restrictions of its Amended Credit Facility and the Notes, the Company could raise additional capital by issuing
unsecured debt, equity or equity-like securities, monetizing or borrowing against certain assets or refinancing existing obligations to generate net cash proceeds.
However, the availability and capacity of these funding sources cannot be assured or predicted. General economic conditions, poor credit market conditions, the
limited amount of unencumbered assets available as collateral for loans or other indebtedness and any adverse changes in the Company’s credit ratings could
adversely impact the Company’s ability to raise capital, if needed, and could increase the Company’s cost of capital.
Credit Ratings. As of December 31, 2009, the Company had a corporate credit rating of B- (outlook negative) from S&P and a corporate family rating of
“Caa1” from Moody’s Investor Services. During 2009, Fitch lowered UAL’s issuer default rating to “CCC” from “B-.” These credit ratings are below investment
grade levels. Downgrades from these rating levels, among other things, could restrict the availability and/or increase the cost of future financing for the
Company.
Other Matters. The Company may, from time to time, make open market purchases of certain of its debt securities or other financing instruments
depending on, among other factors, favorable market conditions and the Company’s liquidity position.
57