United Airlines adds $500 million term loan B-1 to credit facility

By Toni Weeks

San Luis Obispo, Calif., Sept. 19 – United Airlines, Inc. entered into the third amendment to its credit agreement with JPMorgan Chase Bank, NA as administrative agent on Sept. 15, according to an 8-K filing with the Securities and Exchange Commission.

The amendment adds a new term loan class, the class B-1 term loan, in an initial principal amount of $500 million, which is in addition to the company’s existing $900 million term loan facility. It also increases the lending commitments under the company’s revolving facility by $350 million to $1.35 billion. Finally, it designates a maturity date of Jan. 2, 2019 for $1,315,000,000 in lending commitments under the revolving facility.

The class B-1 term loan bears interest at Libor plus 300 basis points with a Libor floor of 0.75%. The term loan must be repaid in quarterly installments of 0.25% of the original principal amount thereof, beginning Dec. 31, with any unpaid balance due Sept. 15, 2021.

The affirmative and negative covenants including in the existing credit agreement continue to be applicable to the amended facility. In addition, the amended facility continues to require the company to maintain unrestricted cash and cash equivalents and unused commitments under all revolving credit facilities of not less than $3 billion and to maintain a minimum ratio of appraised value of collateral to outstanding obligations of 1.67 to 1.00.

According to the filing, obligations under the existing credit facility were secured by liens on certain route authorities, take-off and landing rights and related assets. Concurrently with the amendment, United granted a lien on additional route authorities of United and some related assets. Thus, United’s obligations under the amended credit facility are secured by those liens on the collateral under the existing credit agreement plus the new collateral. Combined, the collateral also secures on a junior-lien basis some obligations of the company to Chase Bank USA, NA under United’s co-branded card marketing services agreement and merchant services bankcard agreement.

United Continental Holdings, Inc. is the guarantor under the credit facility.

Also on Sept. 15, the company borrowed $500 million under the class B-1 term loan and used the proceeds, together with additional available cash, to redeem United’s $800 million of 6¾% senior secured notes. As a result of the redemption in full, the indenture for those notes was terminated.

United is a Chicago-based airline operator.

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