United Airlines (UA, Chicago O'Hare) has opted to borrow the full amount under a USD500 million one-year secured-term loan it arranged on March 20 with the Goldman Sachs investment bank.
United borrowed the amount in two separate disbursements on March 23 and March 24, it confirmed in a stock exchange filing on March 26, adding that “the proceeds of the term loan were used to pay certain transaction fees and expenses, and for working capital and other general corporate purposes of the company.”
The principal amount of the loan must be repaid in a single instalment on the maturity date of March 22, 2021, although United has the option of prepaying all or part of it “from time to time, at par plus accrued and unpaid interest,” the filing explained.
The carrier's obligations under the credit agreement are secured by “certain spare parts of United and certain related assets” as collateral.
The agreement includes covenants that restrict the company’s ability to, among other things, make investments, pay dividends, and repurchase stock. It also requires United to maintain unrestricted cash and cash equivalents totalling at least USD2 billion.
The loan has a variable interest rate equal to the London Inter-Bank Offered Rate (LIBOR) plus a margin of 2.75% per annum, 3%, 3.25%, or 3.5%. Alternatively, United can choose another rate based on certain market interest rates plus a margin of 1.75%, 2%, 2.25% or 2.5% per annum. Either of these cases comes with an incremental increase to the margin occurring at 90, 180, and 270 days, the filing outlined.
