LONG-TERM DEBT
The following table summarizes our long-term debt: |
| | | | | | | | | | | | |
| Maturity | Interest Rate(s) Per Annum at | December 31, |
(in millions) | Dates | December 31, 2013 | 2013 | 2012 |
Pacific Facilities: | | | | | | | | |
Pacific Term Loan B-1(2) | October 2018 | 4.00% | variable(1) | $ | 1,089 |
| $ | 1,100 |
|
Pacific Term Loan B-2(2) | April 2016 | 3.25% | variable(1) | 396 |
| 400 |
|
Pacific Revolving Facility ($450) | October 2017 | undrawn | variable(1) | — |
| — |
|
2011 Credit Facilities: | | | |
| |
| | |
Term Loan Facility(2) | April 2017 | 3.50% | variable(1) | 1,341 |
| 1,354 |
|
Revolving Credit Facility ($1,225) | April 2016 | undrawn | variable(1) | — |
| — |
|
Other Secured Financing Arrangements: | | |
| | | | | |
Certificates(2)(3) | 2014 | to | 2023 | 4.75% | to | 9.75% | 3,834 |
| 4,314 |
|
Aircraft financings(2)(3) | 2014 | to | 2025 | 0.64% | to | 6.76% | 3,787 |
| 3,964 |
|
Other financings(2)(4) | 2014 | to | 2031 | 0.00% | to | 6.12% | 627 |
| 707 |
|
Other Revolving Credit Facilities ($250) | 2014 | to | 2015 | undrawn | variable(1) | — |
| — |
|
Total secured debt | | | | | | | 11,074 |
| 11,839 |
|
American Express - Advance Purchase of Restricted SkyMiles(5) | | | | — |
| 619 |
|
Other unsecured debt(2) | 2014 | to | 2035 | 3.01% | to | 9.00% | 154 |
| 175 |
|
Total unsecured debt | | | | | | | 154 |
| 794 |
|
Total secured and unsecured debt | | | | | | | 11,228 |
| 12,633 |
|
Unamortized discount, net | | | | | | | (383 | ) | (527 | ) |
Total debt | | | | | | | 10,845 |
| 12,106 |
|
Less: current maturities | | | | | | | (1,449 | ) | (1,507 | ) |
Total long-term debt | | | | | | | $ | 9,396 |
| $ | 10,599 |
|
| |
(1) | Interest rate equal to LIBOR (generally subject to a floor) or another index rate, in each case plus a specified margin. |
| |
(4) | Primarily includes loans secured by spare parts, spare engines and real estate. |
| |
(5) | For additional information about our debt associated with American Express, see Note 7. |
Pacific Facilities
In October 2012, we entered into senior secured credit facilities (the "Pacific Facilities") to borrow up to $2.0 billion. The Pacific Facilities consist of two first lien term loan facilities (the "Pacific Term Loans") and a $450 million revolving credit facility (the "Pacific Revolving Facility"). Borrowings under the Pacific Term Loans must be repaid annually in an amount equal to 1% per year of the original principal amount of the respective loans (to be paid in equal quarterly installments). The remaining unamortized principal amounts under the Pacific Term Loans are due on their final maturity dates.
Our obligations under the Pacific Facilities are guaranteed by substantially all of our domestic subsidiaries (the "Guarantors") and secured by a first lien on our Pacific route authorities and certain related assets. For a discussion of related financial covenants, see "Key Financial Covenants" below.
2011 Credit Facilities
In 2011, we entered into senior secured first-lien credit facilities (the “2011 Credit Facilities”) to borrow up to $2.6 billion. The 2011 Credit Facilities consist of a $1.4 billion first-lien term loan facility (the “Term Loan Facility”) and a $1.2 billion first-lien revolving credit facility, up to $500 million of which may be used for the issuance of letters of credit (the “Revolving Credit Facility”).
Borrowings under the Term Loan Facility must be repaid annually in an amount equal to 1% of the original principal amount (to be paid in equal quarterly installments), with the balance due in 2017. Borrowings under the Revolving Credit Facility are due in 2016.
Our obligations under the 2011 Credit Facilities are guaranteed by the Guarantors. The 2011 Credit Facilities and the related guarantees are secured by liens on certain of our and the Guarantors' assets, including accounts receivable, flight equipment, ground property and equipment, certain aircraft, spare engines and parts, certain non-Pacific international routes, domestic slots, real estate and certain investments (the “Collateral”). For a discussion of related financial covenants, see "Key Financial Covenants" below.
Key Financial Covenants
The credit facilities discussed above include affirmative, negative and financial covenants that restrict our ability to, among other things, make investments, sell or otherwise dispose of collateral if we are not in compliance with the collateral coverage ratio tests described below, pay dividends or repurchase stock. We were in compliance with all covenants in our financing agreements at December 31, 2013.
|
| | |
| Pacific Facilities | 2011 Credit Facilities |
Minimum Fixed Charge Coverage Ratio (1) | 1.20:1 | 1.20:1 |
Minimum Unrestricted Liquidity | | |
Unrestricted cash and permitted investments | n/a | $1.0 billion |
Unrestricted cash, permitted investments and undrawn revolving credit facilities | $2.0 billion | $2.0 billion |
Minimum Collateral Coverage Ratio (2) | 1.60:1 | 1.67:1 (3) |
| |
(1) | Defined as the ratio of (a) earnings before interest, taxes, depreciation, amortization and aircraft rent and other adjustments to net income to (b) the sum of gross cash interest expense (including the interest portion of our capitalized lease obligations) and cash aircraft rent expense, for the 12-month period ending as of the last day of each fiscal quarter. |
| |
(2) | Defined as the ratio of (a) certain of the collateral that meets specified eligibility standards to (b) the sum of the aggregate outstanding obligations and certain other obligations. |
| |
(3) | Excluding the non-Pacific international routes from the collateral for purposes of the calculation, the required minimum collateral coverage ratio is 0.75:1 |
Availability Under Revolving Credit Facilities
The table below shows availability under revolving credit facilities, all of which were undrawn, as of December 31, 2013:
|
| | | |
(in millions) | |
Revolving Credit Facility | $ | 1,225 |
|
Pacific Revolving Credit Facility | 450 |
|
Other Revolving Credit Facilities | 250 |
|
Total availability under revolving credit facilities | $ | 1,925 |
|
Future Maturities
The following table summarizes scheduled maturities of our debt, including current maturities, at December 31, 2013: |
| | | | | | | | | |
Years Ending December 31, (in millions) | Total Secured and Unsecured Debt | Amortization of Debt Discount, net | |
2014 | $ | 1,491 |
| $ | (80 | ) | |
2015 | 1,089 |
| (73 | ) | |
2016 | 1,472 |
| (67 | ) | |
2017 | 2,190 |
| (58 | ) | |
2018 | 2,159 |
| (47 | ) | |
Thereafter | 2,827 |
| (58 | ) | |
Total | $ | 11,228 |
| $ | (383 | ) | $ | 10,845 |
|
Fair Value of Debt
Market risk associated with our fixed and variable rate long-term debt relates to the potential reduction in fair value and negative impact to future earnings, respectively, from an increase in interest rates. In the table below, the aggregate fair value of debt was based primarily on reported market values, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral and is classified primarily as Level 2 within the fair value hierarchy.
|
| | | | | | |
| December 31, |
(in millions) | 2013 | 2012 |
Total debt at par value | $ | 11,228 |
| $ | 12,633 |
|
Unamortized discount, net | (383 | ) | (527 | ) |
Net carrying amount | $ | 10,845 |
| $ | 12,106 |
|
Fair value | $ | 11,600 |
| $ | 13,000 |
|
