United Airlines 2011 Annual Report Download - page 138

Table of Contents
. United’s obligations under the Amended Credit Facility are unconditionally guaranteed by United Continental Holdings,
Inc. and certain of its direct and indirect domestic subsidiaries, other than certain immaterial subsidiaries (the “Guarantors”). As of December 31, 2011, the
Amended Credit Facility was secured by certain of United’s international route authorities, international slots, related gate interests and associated rights,
aircraft, and spare engines. The international routes include the Pacific (including China and Hong Kong, but excluding Japan) and London Heathrow routes
(the “Primary Routes”) that United had as of February 2, 2007.
. The Amended Credit Facility contains covenants, that among other things, restrict the ability of United and the
Guarantors to sell assets, incur additional indebtedness, make investments, pay dividends on or repurchase stock, or merge with other companies. UAL and
United must maintain a specified minimum 1.5 to 1.0 ratio of EBITDAR to the sum of the following fixed charges for all applicable periods: (a) cash interest
expense and (b) cash aircraft operating rental expense. EBITDAR represents earnings before interest expense net of interest income, income taxes, depreciation,
amortization, aircraft rent and certain other cash and non-cash credits and charges as further defined by the Amended Credit Facility. The other adjustments to
EBITDAR include items such as foreign currency transaction losses, increases in our deferred revenue obligation, share-based compensation expense, non-
recurring or unusual losses, any non-cash non-recurring charge or non-cash restructuring charge, a limited amount of cash restructuring charges, certain cash
transaction costs incurred with financing activities and the cumulative effect of a change in accounting principle.
The Amended Credit Facility also requires compliance with the following financial covenants: (i) a minimum unrestricted cash balance (as defined by the
Amended Credit Facility) of $1.0 billion at all times, and (ii) a minimum collateral ratio of 150% at any time, or 200% at any time following the release of the
Primary Routes having an appraised value in excess of $1 billion in the aggregate, unless the Primary Routes are the only collateral then pledged, in which case
a minimum collateral ratio of 150% is required. To date, Primary Routes having an appraised value of $875 million have been released. The minimum
collateral ratio is calculated as the market value of collateral to the sum of (a) the aggregate outstanding amount of the loans, plus (b) the termination value of
certain interest rate protection and hedging agreements with the Amended Credit Facility lenders and their affiliates.
The Amended Credit Facility includes events of default customary for similar financings. In addition, the Amended Credit Facility contains cross-default and
cross-acceleration provisions pursuant to which default and/or acceleration of certain other material indebtedness of the Company could result in a default
under the Amended Credit Facility.
Failure to comply with any applicable covenants in effect for any reporting period could result in a default under the Amended Credit Facility unless United
obtains a waiver of or amendment of such covenants, or otherwise mitigates or cures, any such default. A default could result in a termination of the Amended
Credit Facility.
United Senior Secured Notes. In January 2010, United issued $500 million aggregate principal amount of 9.875% Senior Secured Notes due 2013 (the
“United Senior Secured Notes”) and $200 million aggregate principal amount of 12.0% Senior Second Lien Notes due 2013 (the “United Senior Second Lien
Notes”) (collectively, the “United Senior Notes”). United may redeem some or all of the United Senior Notes at any time on or after February 1, 2012 at
specified redemption prices. If United sells certain of its assets or if it experiences specific kinds of a change in control, United will be required to offer to
repurchase the notes. The United Senior Notes are unconditionally guaranteed by UAL and UAL’s subsidiaries that are guarantors or direct obligors under its
Amended Credit Facility. The United Senior 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. The indenture for the
United Senior Notes includes covenants that, among other things, restrict United’s ability to sell assets, incur additional indebtedness, issue preferred stock,
make investments or pay dividends. In addition, the indentures governing the United Senior Notes contain a covenant that requires the Company to maintain a
minimum ratio of collateral
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