America West $429 million seven-year guaranteed loan at Libor + 40 bps

New York, Jan. 31 - America West Airlines, Inc.'s new $429 million loan partially guaranteed by the federal government carries an interest rate of Libor plus 40 basis points, according to a filing with the Securities and Exchange Commission.

The seven-year loan is supported by a $379.55 million government guarantee and amortizes beginning in the third year.

The Phoenix, Ariz. airline must pay a guarantee fee of 550 basis points in the first year and approximately 800 basis points a year after that to the U.S. Treasury and other loan participants.

Thanks to the loan, America West said it was able to obtain $600 million of concessions and restructure $1 billion of debt and lease commitments.

Among the changes, the company's $90 million secured line of credit, which had been fully drawn since late 2000, was converted into a secured term loan maturing at the end of 2007. This loan carries an interest rate of Libor plus 450 basis points and amortizes beginning in the fourth year.

America West's parent, America West Holdings Corp., issued a warrant for up to 18.8 million shares of class B common stock to the federal government and additional warrants for up to 3.8 million shares of class B common stock to other loan participants. All warrants run for 10 years and are exerciseable at $3 per share.

America West Holdings also issued $120 million in convertible senior notes as partial compensation to aircraft lessors. These notes pay a coupon of 7.5% - payable in kind for the first three years - and mature on Jan. 18, 2009. They are convertible after Jan. 18, 2005 at a price of $12. They have a provisional call which triggers the conversion right at par until Jan. 18, 2005 if America West's common stock trades above 120% of the conversion price for at 20 out of 30 consecutive trading days. From Jan. 18, 2005 they are callable at 103.75, then at 102.5, 101.25, declining to par on Jan. 18, 2008.

The new $429 million loan due Sept. 30, 2008 is with Citibank, NA as initial lender and agent and KPMG Consulting, Inc. as loan administrator.

America West paid a structuring fee to Salomon Smith Barney on the closing date, a facility fee to Citibank on the closing date and will pay annually an agency fee to the agent, a supplemental facility fee to Citibank and an administration fee to the loan administrator. The size of these fees was not disclosed in the SEC filing.

The amortization is 10% every six months beginning March 31, 2004 and ending with the final 10% at maturity.

There is a single financial covenant requiring America West to keep a $100 million reserve of unrestricted cash and cash equivalents.

The government guarantee - backed by the full faith and credit of the U.S. - covers part of the principal and the interest due on that amount.

The initial $3.8 million guarantee fee was paid at closing plus the first annual fee. This starts at 550 basis points, rising to 790 basis points on Jan. 18, 2003, then 795 basis points, 800 basis points, 805 basis points, 810 basis points and 815 basis points on Jan. 18, 2008.

The old revolving credit facility now becomes a $89.855 million term loan due Dec. 31, 2007, with the amount subject to a borrowing cast. Banks for the agreement are Industrial Bank of Japan, Ltd. as arranger, agent, lender and co-lead book manager, Citicorp USA, Inc. as arranger and syndication agent, Salomon Smith Barney as co-lead book manager and Bankers Trust Co. as documentation agent.

Interest on the loan is at Libor plus 225 basis points or base plus 275 basis points from closing through Dec. 31, 2004 and Libor plus 475 basis points or base plus 275 basis points after that.

America West is required to repay the principal at $30 million on Dec. 31, 2005, Dec. 31, 2006 and maturity.

Again there is a single financial covenant requiring America West to keep a $100 million reserve of unrestricted cash and cash equivalents.

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