US Airways $125 million agreement with Eastshore Aviation approved by court

By Ellen Chang

Houston, Feb. 28 - US Airways Group, Inc. said its $125 million financing agreement with Eastshore Aviation LLC, an investment entity owned by Air Wisconsin Airlines Corp. shareholders and Air Wisconsin Airlines Corp., was approved by the U.S. Bankruptcy Court for the Eastern District of Virginia Monday.

The agreement will take the form of a $125 million debtor-in-possession term loan. Upon emergence from Chapter 11, the loan will convert to equity in the reorganized US Airways.

The new facility will be second in priority only to the Air Transportation Stabilization Board loan as far as assets that are pledged as collateral.

US Airways expects to draw $75 million as tranche A immediately and then make two subsequent $25 million draws under tranches B and C.

The interest rate on tranches A, B and C is Libor plus 650 basis points. The maturity date is Dec. 31, or Oct. 31 if a disclosure statement has not been approved. There is no commitment fee.

Air Wisconsin, based in Appleton, Wis., is the nation's largest privately held regional airline. In 2004, it had $700 million in revenue.

As part of this agreement, US Airways and Air Wisconsin will enter into an air services agreement under which Air Wisconsin may, but is not required to, provide regional jet service under the US Airways Express brand. Air Wisconsin's arrangements with United Airlines are unaffected by the agreement with US Airways.

The Arlington, Va.-based carrier filed for bankruptcy on Sept. 12. Its Chapter 11 case number is 04-13819.

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