Debt | 9 Months Ended |
Sep. 30, 2013 |
Debt | 5. Debt |
The following table details the Company’s debt (in millions). Variable interest rates listed are the rates as of September 30, 2013. |
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| | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | | | | | | | |
2013 | 2012 | | | | | | | | |
Secured | | | | | | | | | | | | | | | | |
2013 Citicorp credit facility tranche B-1, variable interest rate of 4.25%, installments due through 2019 | | $ | 1,000 | | | $ | — | | | | | | | | | |
2013 Citicorp credit facility tranche B-2, variable interest rate of 3.50%, installments due through 2016 | | | 600 | | | | — | | | | | | | | | |
Citicorp North America loan | | | — | | | | 1,120 | | | | | | | | | |
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.58% to 8.48%, maturing from 2013 to 2029 | | | 1,370 | | | | 1,708 | | | | | | | | | |
Aircraft enhanced equipment trust certificates (“EETCs”), fixed interest rates ranging from 3.95% to 11%, maturing from 2014 to 2025 | | | 2,328 | | | | 1,598 | | | | | | | | | |
Other secured obligations, fixed interest rate of 8%, maturing from 2018 to 2021 | | | 24 | | | | 27 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | 5,322 | | | | 4,453 | | | | | | | | | |
Unsecured | | | | | | | | | | | | | | | | |
6.125% senior notes, interest only payments until due in 2018 | | | 500 | | | | — | | | | | | | | | |
Barclays prepaid miles | | | — | | | | 200 | | | | | | | | | |
7.25% convertible senior notes, interest only payments until due in 2014 | | | 23 | | | | 172 | | | | | | | | | |
Airbus advance, repayments through 2018 | | | 95 | | | | 83 | | | | | | | | | |
Industrial development bonds, fixed interest rate of 6.30%, interest only payments until due in 2023 | | | 29 | | | | 29 | | | | | | | | | |
7% senior convertible notes | | | — | | | | 5 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | 647 | | | | 489 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total long-term debt and capital lease obligations | | | 5,969 | | | | 4,942 | | | | | | | | | |
Less: Total unamortized discount on debt | | | (58 | ) | | | (149 | ) | | | | | | | | |
Current maturities | | | (405 | ) | | | (417 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | |
Long-term debt and capital lease obligations, net of current maturities | | $ | 5,506 | | | $ | 4,376 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The Company was in compliance with the covenants in its debt agreements at September 30, 2013. |
2013 Citicorp Credit Facility |
On May 23, 2013, US Airways entered into a term loan credit facility (the “2013 Citicorp credit facility”) with Citicorp North America, Inc., as administrative agent, and a syndicate of lenders pursuant to which US Airways borrowed an aggregate principal amount of $1.6 billion. Approximately $1.3 billion of the net proceeds were applied to repay US Airways Group’s former Citicorp North America loan and certain other secured debt of US Airways with remaining net proceeds to be used for general corporate purposes. As a result of the repayment of this loan, the Company recorded approximately $8 million in special debt extinguishment charges which are included within other nonoperating expense, net on the accompanying condensed consolidated statement of operations. US Airways Group and certain other subsidiaries of US Airways Group are guarantors of the 2013 Citicorp credit facility. |
The 2013 Citicorp credit facility consists of $1.0 billion of tranche B-1 term loans (“Tranche B-1”) and $600 million of tranche B-2 term loans (“Tranche B-2”). The 2013 Citicorp credit facility is prepayable at any time with a premium of 1% applicable to certain prepayments made prior to November 23, 2013. |
The 2013 Citicorp credit facility bears interest at an index rate plus an applicable index margin or, at US Airways’ option, LIBOR (subject to a floor) plus an applicable LIBOR margin. As of September 30, 2013, the interest rate was 4.25% based on a 3.25% LIBOR margin for Tranche B-1 and 3.50% based on a 2.50% LIBOR margin for Tranche B-2. |
Tranche B-1 and Tranche B-2 mature on May 23, 2019 and November 23, 2016, respectively, and each is repayable in annual installments to be paid on each anniversary of the closing date in an amount equal to 1% of the initial aggregate principal amount of the loans with any unpaid balance due on the maturity date of the respective tranche. |
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The obligations of US Airways under the 2013 Citicorp credit facility are secured by liens on certain route authorities to operate between certain specified cities, certain take-off and landing rights at certain airports and certain other assets of US Airways. |
The 2013 Citicorp credit facility includes covenants that, among other things, (a) require US Airways to maintain (i) unrestricted liquidity of not less than $850 million prior to the Merger and AMR (or its successor) to maintain unrestricted liquidity of not less than $2 billion following the Merger, in both cases with not less than $750 million held in accounts subject to control agreements, and (ii) a minimum ratio of appraised value of collateral to the outstanding loans under the facility of 1.5 to 1.0 and (b) restrict the ability of US Airways Group and its subsidiaries party to the 2013 Citicorp credit facility (and after the Merger AMR, or its successor, and its subsidiaries party to the 2013 Citicorp credit facility) to make certain investments and restricted payments. The 2013 Citicorp credit facility contains events of default customary for similar financings, including a cross-acceleration provision to certain other material indebtedness of US Airways and the guarantors. |
6.125% Senior Notes |
On May 24, 2013, US Airways Group issued $500 million aggregate principal amount of 6.125% Senior Notes due 2018 (the “6.125% senior notes”), the net proceeds of which will be used for general corporate purposes. These notes bear interest at a rate of 6.125% per annum, which is payable semi-annually on each June 1 and December 1, beginning December 1, 2013. The 6.125% senior notes mature on June 1, 2018 and are fully and unconditionally guaranteed by US Airways. The 6.125% senior notes are general unsecured senior obligations of the Company. |
The 6.125% senior notes may be accelerated upon the occurrence of events of default, which are customary for securities of this nature. The Company, at its option, may redeem some or all of the 6.125% senior notes at any time at a redemption price equal to the greater of (1) 100% of the principal amount of the 6.125% senior notes to be redeemed and (2) a make-whole amount based on the sum of the present values of the remaining scheduled payments of principal and interest on the 6.125% senior notes discounted to the redemption date using a rate based on comparable U.S. Treasury securities plus 50 basis points, plus in either case accrued and unpaid interest to the redemption date. In the event of a specified change in control (not including the Merger), each holder may require the Company to repurchase all or a portion of their 6.125% senior notes for cash at a price equal to 101% of the principal amount of the 6.125% senior notes to be repurchased plus any accrued and unpaid interest, if any, to (but not including) the repurchase date. |
2013-1 EETCs |
In April 2013, US Airways created two pass-through trusts which issued approximately $820 million aggregate face amount of Series 2013-1 Class A and Class B EETCs in connection with the financing of 18 Airbus aircraft scheduled to be delivered from September 2013 to June 2014. The 2013-1 EETCs represent fractional undivided interests in the respective pass-through trusts and are not obligations of US Airways. Proceeds received from the sale of EETCs are initially held by a depository in escrow for the benefit of the certificate holders until US Airways issues equipment notes to the trust, which purchases the notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by US Airways and are not reported as debt on US Airways’ condensed balance sheet because the proceeds held by the depository are not US Airways’ assets. |
As of September 30, 2013, $77 million of the escrowed proceeds from the 2013-1 EETCs have been used to purchase equipment notes issued by US Airways in two series: Series A equipment notes in the amount of $58 million bearing interest at 3.95% per annum and Series B equipment notes in the amount of $19 million bearing interest at 5.375% per annum. Interest on the equipment notes is payable semiannually in May and November of each year, beginning in November 2013. Principal payments on the equipment notes are scheduled to begin in November 2014. The final payments on the Series A and Series B equipment notes will be due in November 2025 and November 2021, respectively. US Airways’ payment obligations under the equipment notes are fully and unconditionally guaranteed by US Airways Group. The net proceeds from the issuance of these equipment notes were used to finance two Airbus aircraft delivered in September 2013. The equipment notes are secured by liens on aircraft. The remaining $743 million of escrowed proceeds will be used to purchase equipment notes as new aircraft are delivered. |
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2012-2 EETCs |
In June 2013, US Airways created a new pass-through trust and issued a new class of its US Airways Pass Through Certificates, Series 2012-2: Class C in the aggregate face amount of $100 million. US Airways previously issued two classes of US Airways Pass Through Certificates, Series 2012-2: Class A and Class B in the aggregate face amount of $546 million, pursuant to separate trusts established for each of the Class A certificates and Class B certificates at the time of the issuance thereof in December 2012. |
As of September 30, 2013, US Airways has issued $563 million of equipment notes in three series under its 2012-2 EETCs: Series A equipment notes in the amount of $365 million bearing interest at 4.625% per annum, Series B equipment notes in the amount of $112 million bearing interest at 6.75% per annum and Series C equipment notes in the amount of $86 million bearing interest at 5.45% per annum. Interest on the equipment notes is payable semiannually in June and December of each year and began in June 2013 for Series A and Series B, and will begin in December 2013 for Series C. Principal payments on the Series A and Series B equipment notes are scheduled to begin in December 2013. The final payments on the Series A equipment notes, Series B equipment notes and Series C equipment notes will be due in June 2025, June 2021 and June 2018, respectively. US Airways’ payment obligations under the equipment notes are fully and unconditionally guaranteed by US Airways Group. The only principal payments due on the Series C equipment notes are the principal payments that will be due on the final payment date. The net proceeds from the issuance of these equipment notes were used to finance 10 Airbus aircraft delivered from May 2013 through August 2013. The equipment notes are secured by liens on aircraft. The remaining $83 million of escrowed proceeds will be used to purchase equipment notes as new aircraft are delivered. |
Other Aircraft Financing Transactions |
In the first quarter of 2013, US Airways issued $183 million of equipment notes in three series under its 2012-1 EETCs completed in May 2012: Series A equipment notes in the amount of $111 million bearing interest at 5.90% per annum, Series B equipment notes in the amount of $37 million bearing interest at 8% per annum and Series C equipment notes in the amount of $35 million bearing interest at 9.125% per annum. The equipment notes are secured by liens on aircraft. |
In the third quarter of 2012, US Airways entered into an agreement to acquire five Embraer 190 aircraft from Republic Airline, Inc. (“Republic”). US Airways took delivery of three aircraft in 2012 and the remaining two aircraft in the first quarter of 2013. In connection with this agreement, US Airways assumed the outstanding debt on these aircraft upon delivery and Republic was released from its obligations associated with the principal due under the debt. |
7.25% Convertible Senior Notes |
In the first nine months of 2013, holders converted approximately $149 million principal amount of the 7.25% convertible senior notes, resulting in the issuance of approximately 32.6 million shares of the Company’s common stock. In connection with the conversion of these notes, the Company recorded approximately $28 million in special debt extinguishment charges which are included within other nonoperating expense, net on the accompanying condensed consolidated statement of operations. |
Barclays Prepaid Miles |
In July 2013, the Company repaid in full the Barclays prepaid miles loan at its face amount of $200 million plus accrued interest. |
Fair Value of Debt |
The carrying value and estimated fair value of the Company’s long-term debt was (in millions): |
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| | | | | | | | | | | | | | | | |
| | September 30, 2013 | | | December 31, 2012 | |
| | Carrying | | | Fair | | | Carrying | | | Fair | |
Value | Value | Value | Value |
Long-term debt, including current maturities | | $ | 5,911 | | | $ | 5,984 | | | $ | 4,793 | | | $ | 5,021 | |
The fair values were estimated using quoted market prices where available. For long-term debt not actively traded, fair values were estimated using a discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. If the Company’s long-term debt was measured at fair value, it would have been categorized as Level 2 in the fair value hierarchy. |
US Airways, Inc. [Member] | |
Debt | 4. Debt |
The following table details US Airways’ debt (in millions). Variable interest rates listed are the rates as of September 30, 2013. |
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| | | | | | | | | | | | | | | | |
| | September 30, | | | December 31, | | | | | | | | | |
2013 | 2012 | | | | | | | | |
Secured | | | | | | | | | | | | | | | | |
2013 Citicorp credit facility tranche B-1, variable interest rate of 4.25%, installments due through 2019 | | $ | 1,000 | | | $ | — | | | | | | | | | |
2013 Citicorp credit facility tranche B-2, variable interest rate of 3.50%, installments due through 2016 | | | 600 | | | | — | | | | | | | | | |
Equipment loans and other notes payable, fixed and variable interest rates ranging from 1.58% to 8.48%, maturing from 2013 to 2022 | | | 1,340 | | | | 1,678 | | | | | | | | | |
Aircraft enhanced equipment trust certificates (“EETCs”), fixed interest rates ranging from 3.95% to 11%, maturing from 2014 to 2025 | | | 2,328 | | | | 1,598 | | | | | | | | | |
Other secured obligations, fixed interest rate of 8%, maturing from 2018 to 2021 | | | 24 | | | | 27 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | 5,292 | | | | 3,303 | | | | | | | | | |
Unsecured | | | | | | | | | | | | | | | | |
Airbus advance, repayments through 2018 | | | 95 | | | | 83 | | | | | | | | | |
Industrial development bonds, fixed interest rate of 6.30%, interest only payments until due in 2023 | | | 29 | | | | 29 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | 124 | | | | 112 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total long-term debt and capital lease obligations | | | 5,416 | | | | 3,415 | | | | | | | | | |
Less: Total unamortized discount on debt | | | (55 | ) | | | (62 | ) | | | | | | | | |
Current maturities | | | (384 | ) | | | (401 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | |
Long-term debt and capital lease obligations, net of current maturities | | $ | 4,977 | | | $ | 2,952 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
US Airways was in compliance with the covenants in its debt agreements at September 30, 2013. |
2013 Citicorp Credit Facility |
On May 23, 2013, US Airways entered into a term loan credit facility (the “2013 Citicorp credit facility”) with Citicorp North America, Inc., as administrative agent, and a syndicate of lenders pursuant to which US Airways borrowed an aggregate principal amount of $1.6 billion. Approximately $1.3 billion of the net proceeds were applied to repay US Airways Group’s former Citicorp North America loan and certain other secured debt of US Airways with remaining net proceeds to be used for general corporate purposes. As a result of the repayment of this loan, US Airways recorded approximately $2 million in special debt extinguishment charges which are included within other nonoperating expense, net on the accompanying condensed statement of operations. US Airways Group and certain other subsidiaries of US Airways Group are guarantors of the 2013 Citicorp credit facility. |
The 2013 Citicorp credit facility consists of $1.0 billion of tranche B-1 term loans (“Tranche B-1”) and $600 million of tranche B-2 term loans (“Tranche B-2”). The 2013 Citicorp credit facility is prepayable at any time with a premium of 1% applicable to certain prepayments made prior to November 23, 2013. |
The 2013 Citicorp credit facility bears interest at an index rate plus an applicable index margin or, at US Airways’ option, LIBOR (subject to a floor) plus an applicable LIBOR margin. As of September 30, 2013, the interest rate was 4.25% based on a 3.25% LIBOR margin for Tranche B-1 and 3.50% based on a 2.50% LIBOR margin for Tranche B-2. |
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Tranche B-1 and Tranche B-2 mature on May 23, 2019 and November 23, 2016, respectively, and each is repayable in annual installments to be paid on each anniversary of the closing date in an amount equal to 1% of the initial aggregate principal amount of the loans with any unpaid balance due on the maturity date of the respective tranche. |
The obligations of US Airways under the 2013 Citicorp credit facility are secured by liens on certain route authorities to operate between certain specified cities, certain take-off and landing rights at certain airports and certain other assets of US Airways. |
The 2013 Citicorp credit facility includes covenants that, among other things, (a) require US Airways to maintain (i) unrestricted liquidity of not less than $850 million prior to the Merger and AMR (or its successor) to maintain unrestricted liquidity of not less than $2 billion following the Merger, in both cases with not less than $750 million held in accounts subject to control agreements, and (ii) a minimum ratio of appraised value of collateral to the outstanding loans under the facility of 1.5 to 1.0 and (b) restrict the ability of US Airways Group and its subsidiaries party to the 2013 Citicorp credit facility (and after the Merger AMR, or its successor, and its subsidiaries party to the 2013 Citicorp credit facility) to make certain investments and restricted payments. The 2013 Citicorp credit facility contains events of default customary for similar financings, including a cross-acceleration provision to certain other material indebtedness of US Airways and the guarantors. |
2013-1 EETCs |
In April 2013, US Airways created two pass-through trusts which issued approximately $820 million aggregate face amount of Series 2013-1 Class A and Class B EETCs in connection with the financing of 18 Airbus aircraft scheduled to be delivered from September 2013 to June 2014. The 2013-1 EETCs represent fractional undivided interests in the respective pass-through trusts and are not obligations of US Airways. Proceeds received from the sale of EETCs are initially held by a depository in escrow for the benefit of the certificate holders until US Airways issues equipment notes to the trust, which purchases the notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by US Airways and are not reported as debt on US Airways’ condensed balance sheet because the proceeds held by the depository are not US Airways’ assets. |
As of September 30, 2013, $77 million of the escrowed proceeds from the 2013-1 EETCs have been used to purchase equipment notes issued by US Airways in two series: Series A equipment notes in the amount of $58 million bearing interest at 3.95% per annum and Series B equipment notes in the amount of $19 million bearing interest at 5.375% per annum. Interest on the equipment notes is payable semiannually in May and November of each year, beginning in November 2013. Principal payments on the equipment notes are scheduled to begin in November 2014. The final payments on the Series A and Series B equipment notes will be due in November 2025 and November 2021, respectively. US Airways’ payment obligations under the equipment notes are fully and unconditionally guaranteed by US Airways Group. The net proceeds from the issuance of these equipment notes were used to finance two Airbus aircraft delivered in September 2013. The equipment notes are secured by liens on aircraft. The remaining $743 million of escrowed proceeds will be used to purchase equipment notes as new aircraft are delivered. |
2012-2 EETCs |
In June 2013, US Airways created a new pass-through trust and issued a new class of its US Airways Pass Through Certificates, Series 2012-2: Class C in the aggregate face amount of $100 million. US Airways previously issued two classes of US Airways Pass Through Certificates, Series 2012-2: Class A and Class B in the aggregate face amount of $546 million, pursuant to separate trusts established for each of the Class A certificates and Class B certificates at the time of the issuance thereof in December 2012. |
As of September 30, 2013, US Airways has issued $563 million of equipment notes in three series under its 2012-2 EETCs: Series A equipment notes in the amount of $365 million bearing interest at 4.625% per annum, Series B equipment notes in the amount of $112 million bearing interest at 6.75% per annum and Series C equipment notes in the amount of $86 million bearing interest at 5.45% per annum. Interest on the equipment notes is payable semiannually in June and December of each year and began in June 2013 for Series A and Series B, and will begin in December 2013 for Series C. Principal payments on the Series A and Series B equipment notes are scheduled to begin in December 2013. The final payments on the Series A equipment notes, Series B equipment notes and Series C equipment notes will be due in June 2025, June 2021 and June 2018, respectively. US Airways’ payment obligations under the equipment notes are fully and unconditionally guaranteed by US Airways Group. The only principal payments due on the Series C equipment notes are the principal payments that will be due on the final payment date. The net proceeds from the issuance of these equipment notes were used to finance 10 Airbus aircraft delivered from May 2013 through August 2013. The equipment notes are secured by liens on aircraft. The remaining $83 million of escrowed proceeds will be used to purchase equipment notes as new aircraft are delivered. |
|
Other Aircraft Financing Transactions |
In the first quarter of 2013, US Airways issued $183 million of equipment notes in three series under its 2012-1 EETCs completed in May 2012: Series A equipment notes in the amount of $111 million bearing interest at 5.90% per annum, Series B equipment notes in the amount of $37 million bearing interest at 8% per annum and Series C equipment notes in the amount of $35 million bearing interest at 9.125% per annum. The equipment notes are secured by liens on aircraft. |
In the third quarter of 2012, US Airways entered into an agreement to acquire five Embraer 190 aircraft from Republic Airline, Inc. (“Republic”). US Airways took delivery of three aircraft in 2012 and the remaining two aircraft in the first quarter of 2013. In connection with this agreement, US Airways assumed the outstanding debt on these aircraft upon delivery and Republic was released from its obligations associated with the principal due under the debt. |
Fair Value of Debt |
The carrying value and estimated fair value of US Airways’ long-term debt was (in millions): |
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| | | | | | | | | | | | | | | | |
| | September 30, 2013 | | | December 31, 2012 | |
| | Carrying | | | Fair | | | Carrying | | | Fair | |
Value | Value | Value | Value |
Long-term debt, including current maturities | | $ | 5,361 | | | $ | 5,374 | | | $ | 3,353 | | | $ | 3,304 | |
The fair values were estimated using quoted market prices where available. For long-term debt not actively traded, fair values were estimated using a discounted cash flow analysis based on US Airways’ current incremental borrowing rates for similar types of borrowing arrangements. If US Airways’ long-term debt was measured at fair value, it would have been categorized as Level 2 in the fair value hierarchy. |