US Airways' $708 million ATSB-backed loan reinstatement request approved by board

By Caroline Salls

Pittsburgh, July 25 - US Airways, Inc.'s request for reinstatement of its $708 million Air Transportation Stabilization Board-backed term loan was approved by the ATSB Friday, according to an 8-K filing with the Securities and Exchange Commission.

The ATSB also unanimously voted to grant America West Holdings waivers under its $300 million ATSB-backed term loan that are necessary to consummate the merger.

The ATSB's term sheet provides that the two ATSB-backed loans, which will continue to follow separate repayment schedules and interest rates, would be amended to:

* Require prepayments from the proceeds of specified asset sales by US Airways Group;

* Reschedule amortization payments for US Airways with semi annual payments beginning on Sept. 30, 2007 and continuing through Sept. 30, 2010;

* Require a premium for voluntary prepayments of America West's ATSB-backed loan;

* Revise the interest rate payable on the US Airways loan and the guarantee fees payable on the loans;

* Provide for a first-priority lien on all unencumbered assets of the combined companies to secure US Airways' loan; and

* Implement financial covenants, including minimum cash requirements and required minimum ratios of earnings before interest, taxes, depreciation, amortization and aircraft rent to fixed charges.

The combined company would be required to maintain consolidated unrestricted cash and cash equivalents in excess of 20% of the air traffic liabilities, $250 million to fund a subsequent tax trust, $35 million to post collateral to credit card clearing houses and any unrestricted cash or cash equivalents held in unperfected accounts.

In addition, the lenders under America West's loan would have the option to either participate in US Airways Group's proposed rights offering or receive corresponding anti-dilution adjustments under the warrants issued by America West Holdings in connection with its loan.

The ATSB's approval is subject to various closing conditions, including the consummation of the proposed merger.

US Airways, an Arlington, Va.-based airline, filed for bankruptcy on Sept. 12 with the U.S. Bankruptcy Court for the Eastern District of Virginia. Its Chapter 11 case number is 04-13819.

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