US Airways Group has completed a vital $1.25 billion debt refinancing transaction. The new loan, which was underwritten by GE Commercial Finance and Morgan Stanley Senior Funding, will bear interest at LIBOR plus 3.50 percent. The margin over LIBOR is reduced as the loan is paid down and can be as low as LIBOR plus 2.50 percent if the loan balance is $600 million or less. At launch in March, the transaction was targeted to raise $1.1 billion. It was subsequently increased by $150 million in April in response to the transaction being well oversubscribed. The term of the loan is five years with the entire principal amount payable in full at maturity.

The refinancing provides significant liquidity over the next five years by reducing principal payments and lowering near-term interest expense. Upon funding of the original $1.1 billion, the Company extinguished four separate debt facilities, including both the former America West and US Airways Air Transportation Stabilization Board loans of $250 million and $551 million, respectively; a General Electric Capital Corporation loan of $111 million; and a loan from an affiliate of Airbus of $161 million. The new loan will defer debt maturities and reduce the blended interest margin by approximately 300 basis points. In addition, a second Airbus loan of $89 million was forgiven as part of an agreement with Airbus and will be recognized in the first quarter as a non-operating gain. Therefore, the $1.1 billion loan replaced $1.162 billion of the Company’s balance sheet debt. The additional $150 million raised in the transaction will be used for general corporate purposes.

Upon completion of the transaction, the Company’s debt amortization schedule will be reduced by approximately $88 million in 2006, $171 million in 2007, $269 million in 2008, $229 million in 2009 and $314 million in 2010. In addition, interest expense will be reduced by approximately $25 million in 2006 and $20 million in 2007. The Company’s ending first quarter 2006 total cash, including restricted and unrestricted, was approximately $2.6 billion. The additional $150 million was funded after quarter end on April 7, 2006. The Company has updated its investor relations page on its web site at www.usairways.com to reflect this information.

Senior Vice President and Chief Financial Officer Derek Kerr said, “We are extremely pleased with the outcome of this refinancing. Today’s transaction provides significant liquidity in the near term as we work to complete our integration, and the strong demand and oversubscribed conditions further demonstrate the financial market’s confidence in the new US Airways.”
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