QUOTE
In exchange for this prepayment, the financial covenants contained in the loan were modified through 2005. The revised covenants require that US Airways significantly narrow its losses in 2004 and return to profitability in 2005. The company and the ATSB also agreed to modify other terms and provisions, including lifting certain restrictions on the company’s ability to pursue asset sales.
The financial covenents also contain a clause requiring $700mil in unrestricted cash on hand. Once the company a has $1 less than $700mil unrestricted cash on-hand, the ATSB has the right, I presume, to force another pre-payment or call the loan altogether. (The only caveat here is that the covenent could be reduced to $500mil unrestricted cash on hand if the "going-concern" statement by independent auditors is removed... it hasn't been.)
Next, at last report, March 31, the company had $982mil unrestricted cash. We will have to see where they come in for the quarter ending tomorrow next month.
Based on an average cash burn, I estimated that US Airways would reach the $700mil unrestricted cash level sometime around late October... thus, forcing some action by late Sept or early August.
As reported in another thread, one of the analysts (Jamie Baker maybe?) estimates US Airways unrestricted cash at around $800mil at year end. I presume he knows more than I, and has access to better estimations than "average burn rate" which I used. Under that scenario, US Airways will not be forced to action until sometime in early 2005.
Keep in mind, US Airways went BK the first time with $500-600mil in unrestricted cash (best info from US Airways I could find)... The point being that if US Airways is at $701mil unrestricted cash, even without an ATSB loan being called, they are dangerously close to BK.
