World Airways obtains loan guarantee, closes on loan, restructures convertibles

New York, Jan. 1 - World Airways Inc. said it obtained final approval from the Air Transportation Stabilization Board for a $27 million federal loan guarantee toward a $30 million term loan.

The Peachtree City, Ga., air charter and wet lease company said it funded the new loan on Dec. 30, terminated its previous credit facility with Wells Fargo Foothill Inc. and restructured its convertibles.

"The ATSB loan represents an important milestone for World Airways, as we continue to strengthen our balance sheet and improve our operating performance," said Hollis Harris, chairman and chief executive officer of World Airways, in a news release. "The financial stability provided by this federally guaranteed financing will allow us to continue to build on the positive momentum we have seen in 2003."

Proceeds from the new loan beyond the amount needed to repay the old loan will be used for working capital.

World Airways issued warrants to the ATSB for 10% of its outstanding shares of common stock and 10% of the number of shares underlying certain convertible securities and outstanding warrants.

In the restructuring of its convertibles, World Airways issued $25.545 million principal amount of new 8% convertible senior subordinated debentures due 2009 in an exchange offer for $22.545 million of its old 8% convertible senior subordinated notes due 2004 and $3 million in cash.

World Airways called for redemption the remaining $18 million principal amount of the old convertibles. They will be redeemed on Jan. 28.

World Airways began the exchange for the convertibles on July 23. Subsequently it began talks with four major holders, then with three after failing to reach agreement in the confidentiality period.

On Nov. 11 it said it had agreed to exchange $22.545 million of its existing 8% convertible senior subordinated debentures due 2004 for $25.545 million of new 8% six-year convertible senior subordinated debentures.

The three institutional holders who have agreed to exchange their securities also will pay the company $3 million in cash.

The new convertibles to be issued in the exchange will be convertible into common stock at a price of $3.20 per share. They will be non-callable for one year and after that can be redeemed at par, if the company's stock closes at 200% or more of the conversion price for 20 of 30 consecutive trading days. After two years the threshold declines to 150% of the conversion price. After three years, the securities are callable regardless of stock price.

The existing convertibles had a conversion price of $8.90.

Obtaining agreement to a restructuring of the convertibles was a condition for the ATSB to approve the loan guarantee.

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