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Mesaba parent gets letter of credit to repay accelerated hangar facility revenue bonds
By Angela McDaniels
Seattle, April 21 - Mesaba Aviation Inc. parent MAIR Holdings, Inc. agreed on Tuesday to deliver a $13.11 million letter of credit to bond trustee UMB Bank, NA to back the company's $14 million Kenton County Airport Board special facilities revenue bonds, according to an 8-K report filed with the Securities and Exchange Commission.
The bonds, issued in connection with the company's hangar facility at the Cincinnati/Northern Kentucky airport, were declared immediately due and payable on Feb. 15 by the bondholders.
UMB Bank requested that the company pay the bonds in full by Feb. 24 and subsequently extended that deadline while it negotiated the letter-of-credit agreement with MAIR.
The letter of credit was issued by First Interstate Bank of Billings and is fully collateralized by the company's cash account held at the bank.
Under the agreement with UMB, MAIR is obligated to maintain the letter of credit until its $1.2 million obligations under the bonds and the ground lease for the hangar facility are satisfied. The amount of the letter of credit will automatically decrease each July in accordance with the redemption schedule for the bonds, according to the filing.
UMB may draw on the letter of credit if an event of default under the agreement occurs, including if MAIR fails to make a payment, if it fails to provide evidence that the letter of credit has been renewed annually, if the bonds become subject to mandatory redemption, if MAIR fails to comply with the terms of its agreement with UMB or if the company commits any event of default under its guaranty of Mesaba's bond obligation.
Mesaba, an Eagan, Minn.-based Northwest Airlines affiliate, filed for bankruptcy on Oct. 13, 2005 in the U.S. Bankruptcy Court for the District of Minnesota. Its Chapter 11 case number is 05-39258.
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