Southwest Airlines 2014 Annual Report Download - page 113

Other Company Long-Term Debt
During November 2014, the Company issued $300 million senior unsecured notes due 2019.
The notes bear interest at 2.75 percent, payable semi-annually in arrears on May 6 and November 6.
Concurrently, the Company entered into a fixed-to-floating interest rate swap to convert the interest on
these unsecured notes to a floating rate until their maturity. See Note 10 for further information on the
interest-rate swap agreement.
On April 29, 2009, the Company entered into a term loan agreement providing for loans to the
Company aggregating up to $332 million, to be secured by mortgages on 14 of the Company’s
737-700 aircraft. The Company borrowed the full $332 million and secured the loan with the requisite
14 aircraft mortgages. The loan matures on May 6, 2019, and is being repaid via quarterly installments
of principal that began August 6, 2009. The loan bears interest at the LIBO Rate (as defined in the term
loan agreement) plus 3.30 percent, and interest is payable quarterly, which payments began on
August 6, 2009. Pursuant to the terms of the term loan agreement, the Company entered into an interest
rate swap agreement to convert the variable rate on the term loan to a fixed 6.315 percent until
maturity.
On July 1, 2009, the Company entered into a term loan agreement providing for loans to the
Company aggregating up to $124 million, to be secured by mortgages on five of the Company’s
737-700 aircraft. The Company has borrowed the full $124 million and secured this loan with the
requisite five aircraft mortgages. The loan matures on July 1, 2019, and is repayable semi-annually in
installments of principal that began January 1, 2010. The loan bears interest at a fixed rate of
6.84 percent, and interest is payable semi-annually, which payments began on January 1, 2010.
On May 6, 2008, the Company entered into a term loan agreement providing for loans to the
Company aggregating up to $600 million, to be secured by first-lien mortgages on 21 of the
Company’s 737-700 aircraft. On May 9, 2008, the Company borrowed the full $600 million and
secured these loans with the requisite 21 aircraft mortgages. The loans mature on May 9, 2020, and are
repayable quarterly in installments of principal, with the first payment made on August 9, 2008. The
loans bear interest at the LIBO Rate (as defined in the term loan agreement) plus 0.95 percent, and
interest is payable quarterly. Pursuant to the terms of the term loan agreement, the Company entered
into an interest rate swap agreement to convert the variable rate on the term loan to a fixed
5.223 percent until maturity.
On October 3, 2007, grantor trusts established by the Company issued $500 million Pass
Through Certificates consisting of $412 million 6.15% Series A certificates and $88 million 6.65%
Series B certificates. A separate trust was established for each class of certificates. The trusts used the
proceeds from the sale of certificates to acquire equipment notes in the same amounts, which were
issued by the Company on a full recourse basis. Payments on the equipment notes held in each trust
will be passed through to the holders of certificates of such trust. The equipment notes were issued for
each of 16 Boeing 737-700 aircraft owned by the Company and are secured by a mortgage on each
aircraft. Interest on the equipment notes held for the certificates is payable semi-annually, with the first
payment made on February 1, 2008. Also beginning February 1, 2008, principal payments on the
equipment notes held for both series of certificates are due semi-annually until the balance of the
certificates mature on August 1, 2022. Prior to their issuance, the Company also entered into swap
agreements to hedge the variability in interest rates on the Pass Through Certificates. The swap
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