US Airways to get $130 million bonus payment linked to amended credit card agreement

By Caroline Salls

Pittsburgh, Aug. 12 - US Airways Group, Inc. will receive a $130 million one-time bonus payment from Juniper Bank under the airline's amended co-branded credit card agreement with Juniper and America West Airlines, Inc., according to a filing with the Securities and Exchange Commission.

US Airways, America West Airlines and Juniper Bank, a subsidiary of Barclays plc, entered into the agreement on Monday, which amends America West's co-branded credit card agreement with Juniper and assigns it to US Airways, according to the filing.

Under the agreement, Juniper will pay fees to US Airways for each mile awarded to each credit card account.

Juniper will also pay the one-time bonus payment of $130 million to US Airways upon effectiveness of the merger, subject to conditions including:

*Funding of $500 million in new equity investments in US Airways Group;

*Completion of $250 million of exit financing from Airbus Industrie GIE, of which about $153 million will be funded at the effective time of the merger;

*Commencement of the unwinding of US Airways Group's $170 million tax trust;

*Completion of the merger;

*Juniper's having the sole right to issue credit cards branded with US Airways Group logos for the term of the agreement, except during an initial period during which Bank of America will have the right to market co-branded credit cards bearing US Airways Group logos; and

*US Airways Group's having at least $1.1 billion in unrestricted cash, cash equivalents and short-term investments.

Agreement terms

Juniper will pay a $5 million annual bonus to US Airways Group for each year after Juniper becomes the exclusive issuer of the co-branded credit card.

In addition, when the merger takes effect, Juniper will pre-purchase miles from US Airways Group for $325 million, subject to the same conditions as apply to the $130 million bonus payment.

If these miles are not used by Juniper in connection with the credit card program, US Airways Group will buy back these miles in 12 equal quarterly installments beginning on the fifth year prior to the expiration date until paid in full.

The amended credit card agreement will take effect when the merger takes effect and the credit card services provided by Juniper under the amended credit card agreement are expected to commence on Jan. 1, 2006 and will expire on Dec. 31, 2012.

US Airways Group will make monthly interest payments at Libor plus 475 basis points based on the amount of pre-purchased miles that have not been used by Juniper and have not been repurchased by US Airways.

US Airways Group's credit card program is currently administered by Bank of America, NA (USA) and will terminate two years and three months after the effective date of its merger with America West.

US Airways, an Arlington, Va.-based airline, filed for bankruptcy on Sept. 12, 2004 in the U.S. Bankruptcy Court for the Eastern District of Virginia. Its Chapter 11 case number is 04-13819.

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