US Airways amends loan, changes financial covenants

By Sara Rosenberg

New York, March 12 - US Airways Group Inc. amended its $1 billion loan with the Air Transportation Stabilization Board, revising financial covenants through 2005.

The covenants now require that US Airways significantly narrow its losses in 2004 and return to profitability in 2005, according to a company news release.

Also, the company agreed to a covenant that requires its minimum unrestricted cash balance to not fall below the lower of $700 million and the outstanding balance of the loan at each month until the independent auditors' "going concern paragraph" is removed from the shareholders report. Once the going concern is removed, the unrestricted cash covenant will be reduced to $500 million.

Furthermore, other terms and provisions of the loan agreement were changed, including lifting certain restrictions on the company's ability to pursue asset sales.

In exchange for the covenant revisions, US Airways prepaid $250 million of the loan, bringing the remaining outstanding balance to $726 million. The prepayment was made to lenders on a pro rated basis to both the 90% ATSB guaranteed and 10% non-guaranteed portions of the loan. ATSB's exposure was reduced by $225 million, Bank of America's exposure was reduced by $6.25 million and Retirement Systems of Alabama's exposure was reduced by $18.75 million.

After this payment, the company's unrestricted cash balance was about $925 million.

"It is essential for US Airways to significantly reduce its costs and return to sustained profitability by 2005 to secure continued availability of the ATSB loan," said Neal S. Cohen, US Airways executive vice president finance and chief financial officer, in the release. "This agreement provides US Airways the opportunity to continue its restructuring efforts, while reducing the government's exposure and providing additional loan protections to the ATSB."

US Airways an Arlington, Va., owner of a group of air carrier and airline service subsidiaries.

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