The debtor-in-possession financing for U.S. Airways, which is led by Bank of America and Credit Suisse First Boston, has been shelved after the Retirement Systems of Alabama trumped the Texas Pacific Group's bid for the airline. Instead of the banks providing a $500 million DIP facility, the retirement fund has stepped up with its own underwriting commitment. One investor looking at the proposed bank loan said, "Once Alabama announced their intentions, we knew the loan was dead." Calls to U.S. Airways regarding the financing were referred to a spokesman for the Alabama pension fund, who did not return calls.
Texas Pacific Group had planned to invest $200 million in the airline following its emergence from Chapter 11 in exchange for a 38% share. Alabama, however, will invest $240 million for a 37.5% ownership stake in a restructured U.S. Airways. The Arlington, Va., company also has reached an agreement with the pension fund to restructure $340 million in debt.
The bank-led DIP was to be a one-year facility split between a $250 million revolver and a $250 million "A" term loan, both priced at LIBOR plus 3 1/2%. The banks were offering a 1% upfront fee on the revolver. The terms of the new DIP financing are expected to be similar, an investor said. It could not be ascertained if the DIP financing to be provided by Alabama would be syndicated.