$340 million of pass-through certificates rated
New York, December 15, 2010 -- Moody's Investors Service assigned Ba2 and B2 ratings to the Class A and
Class B Pass Through Certificates, Series 2010-1, respectively,
of the 2010-1 Pass Through Trusts (the "Class A Certificates" and
"Class B Certificates" or collectively, the "Certificates") to be
issued by US Airways, Inc. ("US Airways"). The transaction
documentation provides for the possible issuance of one additional subordinated
tranche of certificates at a future date. The subordination provisions
of the inter-creditor agreement provide for the payment of interest
on the Preferred Pool Balance of the Class B Certificates before payments
of principal on the Class A Certificates. Amounts due under the
Certificates will, in any event, be subordinated to any amounts
due on either of the Class A or Class B Liquidity facilities, each
of which provides for three consecutive semi-annual interest payments
due the respective Certificate holders.
The Class A and Class B Equipment Notes ("Notes") issued by US Airways
and acquired with the proceeds of the Certificates will be the primary
assets of the Pass Through Trust. The Certificates' proceeds will
refinance eight currently owned Airbus aircraft; each delivered new
in 2009 with any excess proceeds held for general corporate purposes.
The payment obligations of US Airways under the equipment notes will be
fully and unconditionally guaranteed by US Airways Group, Inc.
Assignments:
..Issuer: US Airways, Inc.
....Senior Secured Enhanced Equipment Trust,
Class A, Assigned Ba2
....Senior Secured Enhanced Equipment Trust,
Class B, Assigned B2
Rating Rationale
The ratings of the Certificates consider the credit quality of US Airways
(Corporate Family Rating of Caa1, stable outlook) as obligor under
the Notes, Moody's opinion of the collateral protection of the Notes,
the credit support provided by the Liquidity Facilities, the cross-subordination
provisions of the inter-creditor agreement and certain structural
characteristics of the Notes such as the cross-collateralization
and cross-default provisions and the protections of Section 1110
of Title 11 of the United States Code (the "Code"). The assigned
ratings of Ba2 and B2 on the Class A and Class B Certificates, respectively,
reflect Moody's opinion of the ability of the Pass-Through Trustees
to make timely payment of interest and the ultimate payment of principal
at a date no later than October 22, 2024 for the Class A Certificates
and October 22, 2018 for the Class B Certificates, each the
final maturity dates.
The aircraft collateral of this financing will be the youngest vintages
in any of US Airways' (including those of the former America West
Airlines) other Enhanced Equipment Trust Certificate ("EETC")
financings. Additionally, the underlying obligations of a
majority of the aircraft in the other EETCs of US Airways are operating
leases, whereby an unrelated third-party holds the equity
and ultimate potential loss position in the event of a restructuring by
US Airways. The ratings assigned to each of the tranches of the
Series 2010-1 certificates reflects Moody's belief of a high
probability of affirmation by US Airways of the underlying equipment notes
in the event of a reorganization by US Airways under a default scenario
because of the young age of the aircraft and the cross-default
and cross-collateralization feature. The ratings also consider
the more modest over-collateralization that this financing contemplates
relative to those of other recent EETCs issued by other U.S.
carriers.
At Ba2, the rating on the A-tranche of 2010-1 is one
notch above the current Ba3 ratings on the G-tranches of US Airways'
2000-2, 2000-3 and 2001-1 EETCs, financings
with modestly higher loans-to-value based on Moody's
current estimates of aircraft values. Moody's believes that
the probability of affirmation of US Airways' obligations under
the underlying financing agreements is greater for the 2010-1 Series
because of the operating benefits of nearly new aircraft versus those
of 10 or 11-year old Airbus aircraft in these other EETCs.
The inclusion of A330-200s in the 2010-1 EETC also makes
the collateral of 2010-1 more attractive under a reorganization
scenario as there are relatively few wide-bodies in this carrier's
fleet and the lift provided by these aircraft would be needed to support
its long-haul network relative to those of its U.S.
legacy carrier peers. The over-collateralization that this
financing contemplates (above 60% on the A-tranche and above
75% on the B-tranche, based on Moody's estimates
of value) provides a smaller equity cushion relative to those of other
EETCs recently issued by other U.S. carriers. Nevertheless,
the cross-collateralization of the equipment notes should enhance
the recovery for investors in the event of the rejection of the aircraft
by US Airways in the event of a bankruptcy filing by it and pursuant to
the provisions of the Code or in the event of a default on the Certificates.
Any combination of future changes in the underlying credit quality or
ratings of US Airways or US Airways Group, Inc., unexpected
material changes in the value of the aircraft pledged as collateral,
and/or changes in the status or terms of the liquidity facilities or the
credit quality of the liquidity provider could cause Moody's' to change
its ratings of the Certificates.
General Structure of the Series 2010-1 EETC
The proceeds of the Certificates will initially be held in escrow and
deposited with the Depositary, The Bank of New York Mellon (short-term
rating of P-1), until the issuance of each of the eight Notes.
The interest on these funds will be sufficient to pay accrued interest
on the outstanding Certificates during the Delivery Period which expires
on or before January 21, 2011.
The collateral pool consists of the following eight aircraft as follows:
(i) one 2009 vintage Airbus A320-200;
(ii) five 2009 vintage Airbus A321-200s; and
(iii) two 2009 vintage Airbus A330-200s
The transaction documentation provides for US Airways to upsize the amount
of the financing by including four additional aircraft as follows:
i) one 2009 vintage Airbus A320-200, ii) two 2009 vintage
Airbus A321-200s and iii) one 2010 vintage Airbus A330-200.
Should US Airways choose to upsize the principal amount of the 2010-1
EETC to include the refinancing of the additional four aircraft as outlined
in this transaction's Prospectus Supplement dated December 15,
2010, Moody's would affirm the Ba2 rating on the A-tranche
and the B2 rating on the B-tranche because the loan-to-value
ratios will be similar to those of the announced eight aircraft financing.
The Certificates issued to finance the aircraft are not obligations of,
nor are they guaranteed by US Airways. However, the amounts
payable by US Airways under the Notes will be sufficient to pay in full
all interest and principal on the Certificates when due. The Notes
will be secured by a perfected security interest in the aircraft.
It is the opinion of counsel to US Airways that the Notes will be entitled
to the benefits of Section 1110 of the U.S. Bankruptcy Code.
Scheduled interest payments on the Certificates will be supported by the
Liquidity Facilities sized to pay up to three respective consecutive semi-annual
interest payments in the event US Airways defaults on its obligations
under the Notes. The liquidity facilities do not provide for payments
of principal due, nor on interest on the Certificate proceeds held
in escrow during the Delivery Period. Morgan Stanley Bank,
N.A. (Moody's short-term rating of P-1) will
provide the Liquidity Facilities. The liquidity provider has a
priority claim on proceeds from liquidation of any of the aircraft or
of the Notes and other Trust collateral ahead of any of the holders of
the Certificates and is also the controlling party following a default
under the Notes indentures.
Cross-Collateralization
The ratings of the 2010-1 Certificates benefit from the cross-collateralization
of the Notes, a feature which Moody's believes can enhance recovery
in the event of a default. The structure provides that for each
aircraft sold following a default, the excess of sale proceeds above
the payoff of the related equipment note is made available to cover potential
shortfalls that might arise under any other equipment note upon the sale
of the aircraft pledged to any such note. Importantly, following
a default, all excess proceeds are retained until the settlement
at maturity of the last of the eight equipment notes or the indentures
are cancelled.
Moody's considers the number of aircraft and the number of different aircraft
models that comprise the collateral pool when assessing the benefit of
a cross-collateralized EETC. At eight aircraft covering
three different types, the collateral pool is modest, providing
only limited benefit for this feature. The included aircraft types
do not constitute a significant concentration in any particular aircraft
type within its combined mainline fleet. Being the youngest vintages
in the company's fleet and that each of the models would be integral
to the company's network support the likelihood of affirmation by
US Airways of its obligations under the Notes under a reorganization scenario,
thus minimizing the probability of the cross-collateralization
benefit being called upon by creditors over the life of the transaction.
The last rating action was on July 21, 2010 when Moody's upgraded
the Speculative Grade Liquidity rating to SGL-3 and changed the
rating outlook to stable.
The principal methodologies used in this rating were Global Passenger
Airlines published in March 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
US Airways Group, Inc. ("USAirways), based in Tempe,
Arizona, through its subsidiaries operates one of the largest airlines
in the U.S. with service throughout the U.S.
as well as Canada, Mexico, Europe, the Middle East,
the Caribbean, Central and South America.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Jonathan Root
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's rates US Airways' 2010-1 EETC
