US Airways closes on $800 million of financing, looks forward to $150 million more

By Angela McDaniels

Tacoma, Wash., Oct. 23 - US Airways Group, Inc. has raised roughly $950 million of financing and near-term liquidity commitments from several of its strategic business partners and closed on $800 million of these transactions on Monday, according to a company news release.

The financing was raised as part of a comprehensive liquidity program launched in mid August.

The financing includes:

• An amendment to the company's America West co-branded card agreement with Barclays Bank Delaware that provides for the pre-purchase of $200 million of frequent flyer miles. US Airways will pay interest to Barclays on the pre-purchased miles at the rate of Libor plus a margin.

In each month that specified conditions are met, Barclays will pre-purchase additional miles in an amount equal to the difference between $200 million and the amount of unused miles then outstanding.

The co-branded card agreement was extended to 2017;

• Two new six-year loan agreements totaling $355.171 million with General Electric Capital Corp. as administration agent. One loan, for $270 million is secured by a first-priority interest on US Airways' spare parts, the other, for $85.171 million, by engines. They accrue interest at Libor plus a margin; and

• Amendments to its purchase agreements with Airbus SAS. Airbus advanced to US Airways $200 million earned in consideration of aircraft deliveries, and US Airways agreed to maintain $850 million of unrestricted cash.

Of the proceeds, $400 million was used to prepay the company's $1.6 billion bank debt facility. The remaining proceeds will be used for general corporate purposes.

The remaining $150 million of liquidity commitments are expected to close during the fourth quarter, with cash benefits realized through 2009.

Republic Airways chips in

In addition, Republic Airways Holdings Inc. agreed to provide up to $35 million to US Airways in two tranches. The first tranche of $10 million was funded on Monday.

At US Airways' option, and subject to specified conditions, the second tranche of $25 million may be funded in the first quarter of 2009.

Interest will be paid quarterly, with the principal amounts to be repaid between October 2009 and October 2011, according to a Republic Airways news release.

"Combined with our August equity offering which generated $179 million, and other financings completed during the quarter, US Airways has raised or secured approximately $1.2 billion in cash and payment deferrals since we released our second quarter financial results," US Airways chief financial officer Derek Kerr said in his company's release.

US Airways is a Tempe, Ariz.-based airline company.

Republic Airways is an Indianapolis-based airline holding company. All of its airlines' flights are operated under the brand of airline partners that include US Airways.

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