United Airlines 2012 Annual Report Download - page 131

Table of Contents
option to require UAL to repurchase all or a portion of their notes on June 30, 2016 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. All or a portion of 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.
New PBGC Notes. On December 31, 2012, UAL and United entered into an agreement with the PBGC that reduced the aggregate amount of 8% Contingent
Senior Notes to be issued by UAL, and eliminated the contingent nature of such obligation by replacing the $188 million principal amount of 8% Contingent
Senior Notes incurred as of December 31, 2012 and the obligation to issue any additional 8% Contingent Senior Notes with $400 million principal amount of
new 8% Notes due 2024 (the “New 8% Notes”). In addition, UAL and United agreed to replace the $652 million principal amount outstanding of UAL’s 6%
Senior Notes due 2031 with $326 million principal amount of new 6% Notes due 2026 and $326 million principal amount of 6% Notes due 2028
(collectively, the “New 6% Notes” and together with the New 8% Notes, the “New PBGC Notes”). The Company did not receive any cash proceeds in
connection with the issuance of the New PBGC Notes. The Company is accounting for this agreement as a debt extinguishment, resulting in a charge of $309
million that represents the fair value of $212 million of New 8% Notes that it agreed to issue and the change in the fair value of the New 6% Notes and the
$188 million of New 8% Notes versus their previous carrying values. The Company classified the expense as a component of special charges because the note
restructuring would not have occurred if it were not for the Merger.
UAL recorded a liability during 2011 in connection with issuing $125 million principal amount of the 8% Contingent Senior Notes at their fair value of $88
million as a component of integration costs. In addition, at June 30, 2012, UAL recorded a liability of $48 million during the second quarter for the fair value
of the obligation to issue a tranche of an additional $62.5 million of the 8% Contingent Senior Notes.
United Amended Credit Facility. United’s Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as of February 2, 2007 (the
“Amended Credit Facility”) consists of a term loan which had a balance of $1.2 billion as of December 31, 2012. The term loan matures on February 1,
2014.
Borrowings under the Amended Credit Facility bear interest at a floating rate, which, at United’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 term loan requires regularly scheduled semiannual
payments of principal equal to $9 million. United may prepay all or a portion of the loan from time to time, at par plus accrued and unpaid interest.
As of December 31, 2012, United had cash collateralized $77 million of letters of credit, most of which had previously been issued under the Amended Credit
Facility. United also had $300 million of performance bonds. Continental had letters of credit and performance bonds relating to various real estate, customs
and aircraft financing obligations at December 31, 2012 in the amount of approximately $67 million. Most of the letters of credit have evergreen clauses and
are expected to be renewed on an annual basis and the performance bonds have expiration dates through 2016.
United Senior Secured Notes. On February 1, 2013, United redeemed all of the $400 million aggregate principal amount of its 9.875% Senior Secured
Notes due 2013 and $200 million aggregate principal amount of 12.0% Senior Second Lien Notes due 2013.
United EETCs. United has $1.6 billion principal amount of equipment notes outstanding issued under EETC financings included in notes payable in the
table of outstanding debt above. Generally, the structure of all of these EETC financings consist of pass-through trusts created by United to issue pass-
through certificates. The pass-through certificates represent fractional undivided interests in the respective pass-through trusts and are not obligations of
United. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes which are issued by United and secured by
United’s aircraft. The payment obligations of United
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