US Airways paid down $125 million in Q4, will refinance loan 'soon'

By Paul Deckelman

New York, Jan. 23 - US Airways Group, Inc. paid down $125 million of debt during the 2012 fourth quarter and envisions a refinancing transaction "pretty soon" for $1.1 billion of term loan debt scheduled to mature next year but which will shortly become a current liability on its balance sheet.

"We have been working with the banks to find the optimal solution for that," the Tempe, Ariz.-based airline operator's chief financial officer, Derek J. Kerr, told analysts and journalists on the company's Wednesday conference call following the release of its quarterly results.

He said that the current term loan - which should become current in about three months - has "some really good collateral behind it," but he added that the company has other available collateral such as spare parts and engines that could be secured for potential further borrowings.

"We are working today - we've been working over the last month - to find the right time and the right transaction. So I believe you'll see us move forward pretty soon on a transaction to do that [refinance the 2014 loan]. I think it's available. It's there today. I think the market is really strong. We're just trying to make sure we have the optimal collateral package when we go out. But we're prepared and we're ready to move in the near future" on refinancing the 2014 term loan.

Certificates swell debt load

At the end of the fourth quarter on Dec. 31, the company's balance sheet showed $417 million of current debt maturities and capital leases, versus $436 million a year earlier, while its long-term debt and capital leases at the end of the quarter stood at $4.38 billion, up from $4.13 billion a year earlier.

Included in that higher debt figure was the company's most recent debt transaction, a $546 million issue of enhanced equipment trust certificates. That quick-to-market two-part deal, which priced on Nov. 29, consisted of $418 million of 4 5/8% class A certificates with a final expected distribution date of June 3, 2025 and about $128 million of 6¾% class B certificates with a final expected distribution date of June 3, 2021. Proceeds from the EETC deal are slated to pay for 11 new Airbus aircraft the company is scheduled to take delivery on between May and October of this year. The balance, if any, will go for general corporate purposes.

That EETC deal was the second such transaction the company did during 2012; on April 30, it priced $623.3 million of new paper in a quickly shopped three-part deal, sharply upsized from an original $356.9 million. That earlier transaction consisted of $379.7 million of 5.9% class A certificates with a final expected distribution date of Oct. 1, 2024, upsized from $268.6 million; $124.9 million of 8% class B certificates with a final distribution on Oct. 1, 2019, upsized from $88.3 million; and $118.6 million of 9 1/8% class C certificates with a final expected distribution and final maturity date of Oct. 1, 2015, which was not upsized. Proceeds from that deal were earmarked for refinancing two Airbus aircraft currently owned by US Airways and for the financing of 12 new Airbus planes scheduled to be delivered from September 2012 to March 2013, with the balance, if any to be used for general corporate purposes.

Financing lined up

Kerr said that the airline is scheduled to take delivery of a total of 23 new aircraft this year, spaced out evenly over the four quarters. He said that the secured financing had been done for 17 of those planes via the two EETC deals the company did last year. As for the remainder, he said that for planning purposes, the company's current guidance assumes that they will be fully financed via sale-and-leaseback transactions, with backstop financing from Airbus in place.

However, he said that it was quite possible that they could ultimately be financed some different way. He declared that "we're working today on those six aircraft," projecting that "we will come back, probably within the next couple of quarters, to firm up financing for that." He also said that US Airways was even now "looking into 2014 to finance the aircraft in 2014 that we have coming."

The company ended the fourth quarter with $2.71 billion of total cash and investments, of which $336 million was restricted - up by $400 million from its year-end 2011 balance of total cash and investments. The 2012 figure was its highest year-end cash balance since 2007.

In the fourth quarter of 2012, the company generated $130 million of positive cash flow from operations and generated about $45 million of free cash flow. It paid down $125 million of debt during the fourth quarter, and during the full year, it generated about $1 billion .of operating cash flow and $668 million of free cash flow.

A record profit

For full year 2012, US Airways reported a record net profit of $537 million, or $2.79 per diluted share, which excludes net special items totaling a credit of $100 million - well up from a full-year 2011 net profit of $111 million excluding net special items, or 68 cents per diluted share.

For the fourth quarter, net profit excluding net special items was $46 million, or 26 cents per diluted share, versus net profit excluding net special items for the 2011 fourth quarter of $21 million, or 13 cents per diluted share.

Company executives on the call declined to address speculation that US Airways may seek to acquire troubled rival AMR Corp., the parent company of American Airlines.

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