Another Change To The Atsb-backed Loan

[BoeingBoy]

More changes to the ATSB-back loan agreement.....

It seems that the primary Tranche A lender (YC Susi Trust) has demanded their money back. Normally, under the original terms of the loan agreement, the alternate Tranche A lender (Bank of America) would step in, but apparently they don't want to. The result? Govco, Inc will become the primary Tranche A lender and Citibank will become the alternate Tranche A lender. After a quick scan of the proposed amendments to the loan agreement seem to indicate that the interest rate will go up 10 basis points (0.1%) and the schedule for repayment of principal may be changed (not the timetable but the amounts due on each payment date).

For those not familiar with the terms in the loan agreement, the Tranche A lender provided 90% of the loan ($900 million initially) with the ATSB guaranteeing to make them whole if we didn't pay and the Tranche B lenders provided the other 10% ($100 million initially) with no government guarantees. The relative percentages have remained constant, though as the outstanding balance has been paid down the amount owed to the various lenders had declined.

Jim

[Addition by me]

The changes are in Docket #1261 here.

 

[SVQLBA]

In case anyone is confused, as I was, Govco is actually a Citicorp subsidiary that specializes in debt backed / guaranteed by the Federal Government. It is not a vehicle for the ATSB or other government agency to provide finance directly.

 

[BoeingBoy]

Thanks. I wondered about that but couldn't find anything definitive on the net prior to posting the above.

Jim

 

[oldiebutgoody]

Kind of ominous, lenders beginning to demand repayment. I hope this isn't the beginning (or middle, actually) of the end. And this was THE GUARANTEED part!

 

[markkus757]

What if US Airways runs out of Tranche Lenders?

 

[insp89]

What if US Airways runs out of Tranche Lenders?

[post="227270"][/post]​

Man, That's a tough question, Let me think about it for a while..... :blink:

 

[usairways_vote_NO]

The writing is on the wall as it has been for some time. Be prepared for the worst.

 

[funguy2]

Is there a reason why CitiCorp is willing to step up after two banks back out?

Also, any word on how much the increase in interest rate will increase quarterly interest expenses?

I agree... not a good sign. While I certainly didn't "forsee" or predict this move, I am surprised somewhat at the modest amount of the rate hike... I would have expected more... like 0.25%. But 0.1% on a loan this size is a nice chunk of change. It makes sense for the interest rate (or return to the bank) to increase as the risk increases.

 

[BoeingBoy]

funguy,

As I recall, we're already paying the higher "default" interest rate. I believe that there are some changes in what the rate is based on with this latest revision, but not sure without going back and checking the original agreement. One thing worth noting is that we're talking about the interest on the government-backed portion of the loan - can't get much safer than that.

Jim

 

[jack mama]

So, is it is bad because Bank of America and YST are pulling out, or good because someone else is ready to step up to the plate?