US Airways Group Inc., the carrier merging with AMR Corp.’s American Airlines, is seeking $1.6 billion of term loans to refinance debt due next year, according to a person with knowledge of the transaction.
The financing consists of a $1 billion portion that matures in six years and a $600 million piece due in 3.5 years, said the person, who asked not to be identified because terms of the deal are private.
The $1 billion loan will pay interest at 3.5 percentage points to 3.75 percentage points more than the London interbank offered rate, with a 1 percent minimum on the lending benchmark, the person said. US Airways may sell the debt to investors at 99 cents on the dollar.
The $600 million piece will pay interest at 2.75 percentage points to 3 percentage points more than Libor, with a 1 percent floor, and may be sold at a discount of 99.5 cents, the person said.
In April, AMR filed a plan to exit bankruptcy based on a proposed merger with US Airways that would create the world’s largest airline. The American Airlines parent filed for bankruptcy in Manhattan in November 2011 and announced the deal with US Airways in February.
The new credit pact requires the company to keep at least $850 million of liquidity prior to the merger with AMR and $2 billion after it is completed, according to the person with knowledge of the transaction.
The debt will refinance loans due in 2014 and contribute $248 million of balance-sheet cash for general corporate purposes, the person said.
Investors in the loan deal are being offered 101 soft-call protection for the first six months, meaning US Airways would have to pay a one-cent premium to reprice the debt during that period.
Citigroup Inc., Barclays Plc, Morgan Stanley and Goldman Sachs Group Inc. are arranging the debt for the company, the person said. Investors must let the banks know by May 16 whether they will participate in the deal, according to the person.
A telephone call to Tempe, Arizona-based US Airways seeking comment wasn’t immediately returned.