GE Capital and Morgan Stanley are arranging $1.1 billion in loans for US Airways. The five-year, $1.1 billion senior secured term loan is expected to hit the market in the next few weeks. The company is using the credit to refinance several existing loans including those for subsidiaries, Airbus and America West Airlines.
Pricing on the term loan will be based on ratings from Moody's Investors Service and Standard & Poor's. If the deal gets a rating higher than B1/B+, pricing will be set at LIBOR plus 3 1/2%. If the ratings assigned are below these levels, pricing on the loan will be LIBOR plus 3 3/4%. "I think that they will probably end up paying the higher interest rate," one investor remarked. "The last time they were rated [by Moody's] they came in below that mark. It's still decent pricing though," he added.
There's no amortization on the term loan, the entire principal amount due at maturity. The facility is being secured by all the assets that secure the existing term loans. This includes cash, accounts receivable, ground service equipment, spare parts and engines, flight simulators, real estate and airport gates at LaGuardia and Ronald Reagan airports.
Based in Tempe, Ariz., US Airways is the seventh largest airline in the U.S with a fleet of over 250 airplanes. The company merged with AWA in 2005 and the operations of the two airlines are expected to be combined sometime in 2007. Calls to Morgan Stanley were not returned and a banker at GE declined to comment. David Kerr, senior v.p. and cfo at US Airways, did not return calls.