The strong collateral backing US Airways Group's $1.25 billion term loan attracted investors on its break in the secondary market, according to traders. The deal broke last Monday at 101 1/4 101 3/4 and continued to trade in that context. One trader estimated more than $20 million of paper exchanged hands on its debut. "Compared to other airlines, it has got a good collateral position," said a trader. "It is popular from a security standpoint."
GE Capital and Morgan Stanley lead the financing, which US Airways will use to refinance existing loans, including those of its subsidiaries, Airbus and America West Airlines (CIN, 3/17). The company increased the size of the term loan by $150 million to pay off additional debt, said a trader. The deal, which is priced at LIBOR plus 3 1/2%, was three-to-four times oversubscribed.
Moody's Investors Service assigned a B2 rating to the credit facility. The rating reflects the value of the collateral securing the loan and its seniority over $625 million of unsecured debt. Covenants include minimum EBITDAR to fixed charges of 0.86 to 1.0 through to Sept. 30, 2006; 0.9 to 1.0 through Dec. 31, 2006; and 0.93 to 1.0 through March 31, 2007. Covenants also require the company to hold minimum unrestricted cash and cash equivalents of $750 million. A US Airways spokesman did not return calls.