United Airlines 2011 Annual Report Download - page 136

Table of Contents
In July 2011, UAL sold an additional $165 million of pre-purchased miles to Chase. Continental rolled the remaining balance of the pre-paid miles under its
previously existing co-branded agreement into the Co-Brand Agreement when it terminated its debit card co-brand agreement with Chase. UAL has the right,
but is not required, to repurchase the pre-purchased miles from Chase during the term of the agreement. The Co-Brand Agreement contains termination
penalties that may require United and Continental to make certain payments and repurchase outstanding pre-purchased miles in cases such as the Company’s
insolvency, bankruptcy or other material breaches. The Company has recorded these amounts as advanced purchase of miles in the non-current liabilities
section of the Company’s condensed consolidated balance sheets.
The obligations of UAL, United, Continental and Mileage Plus Holdings, LLC to Chase under the Co-Brand Agreement are joint and several. Certain of
United’s obligations under the Co-Brand Agreement in an amount not more than $850 million are secured by a junior lien in all collateral pledged by United
under its Amended Credit Facility. All of Continental’s obligations under the Co-Brand Agreement are secured by a junior lien in all collateral pledged by
Continental to secure its 6.75% Senior Secured Notes due 2015. United also provides a first priority lien to Chase on its MileagePlus assets to secure certain
of its obligations under the Co-Brand Agreement and its obligations under the new combined credit card processing agreement among Continental, United,
Paymentech, LLC and JPMorgan Chase. After Continental’s OnePass Program anticipated termination in 2012, certain of the OnePass Program assets will be
added as collateral to such MileagePlus assets.
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6% Senior Convertible NotesThe 6% Senior Convertible Notes due 2029 (the “UAL 6% Senior Convertible Notes”) may be converted by holders into
shares of UAL’s common stock at a conversion price of approximately $8.69 per share. UAL does not have the option to pay the conversion price in cash
upon a noteholder’s conversion; however, UAL may redeem for cash all or part of the UAL 6% Senior Convertible Notes on or after October 15, 2014. In
addition, holders of the UAL 6% Senior Convertible Notes have the right to require UAL to purchase all or a portion of their notes on each of October 15,
2014, October 15, 2019 and October 15, 2024 or if certain changes of control of UAL occur, payable by UAL in cash, shares of UAL common stock or a
combination thereof, at UAL’s option.
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The 4.5% Senior Limited Subordination Convertible Notes due 2021 (the “4.5% Notes”), 5% Senior Convertible Notes due 2021 (the “5% Notes”) and 6%
Senior Notes due 2031 (the “6% Senior Notes”), as further described below, were issued by UAL, have been pushed down to United and are reflected as debt
of United. The obligations of UAL under each of these notes and the indentures under which these notes were issued are unconditionally guaranteed by
United.
4.5% Notes. In June 2011, UAL repurchased at par value approximately $570 million of the $726 million outstanding principal amount of its 4.5% Notes
due 2021 with cash after the notes were put to UAL by the noteholders. The 4.5% Notes do not require any additional payment of principal prior to maturity;
however, holders of the 4.5% Notes have the option to require UAL to repurchase all or a portion of their notes on June 30, 2016. UAL may elect to pay the
repurchase price in cash, shares of UAL common stock or a combination thereof. The 4.5% Notes are junior, in right of payment upon liquidation, to UAL’s
obligations under the 6% Senior Notes discussed below. The 4.5% Notes are callable, at UAL’s option, at any time at par, plus accrued and unpaid interest,
and can be redeemed with cash, shares of UAL common stock or a combination thereof except that UAL may elect to pay the redemption price in shares of
UAL common stock only if the closing price of UAL common stock has not been less than 125% of the conversion price for the 60 consecutive trading days
immediately prior to the redemption date.
5% Notes. In the first quarter of 2011, UAL repurchased all of its $150 million face value 5% Notes due in 2021 with cash after substantially all of the
notes were put to UAL by the noteholders.
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