This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ NOMINATED FOR 7 BROADCAST FILM CRITICS AWARDS IN AMERICA has been nominated for 7 BFCA Awards including Best Picture, Best Actress Best Director, Best Writer, Best Young Actor/Actress, and Best Song. Ebert & Roeper give IN AMERICA "Two Thumbs Way Up!" Watch the trailer at: http://www.foxsearchlight.com/inamerica \----------------------------------------------------------/ Debt Rating of US Airways Cut Another Notch by S. & P. January 10, 2004 By MICHELINE MAYNARD US Airways, which its chairman has said is in danger of defaulting on $900 million in government-backed loans, had its debt rating lowered yesterday by Standard & Poor's because of concerns about growing competition from low-fare carriers. Standard & Poor's also kept US Airways and its corporate parent, the US Airways Group, on negative CreditWatch, meaning that the airline's debt could be downgraded again in the near future. The downgrade - to B- from B, both well below investment grade - capped a bleak week for US Airways, the nation's seventh-largest airline, which has encountered financial problems since emerging from Chapter 11 bankruptcy protection last April. On Thursday, the airline's chairman, David G. Bronner, confirmed that the airline had retained Morgan Stanley to seek potential buyers for some of its biggest assets. Among the units the airline is considering putting up for sale is its East Coast shuttle; regional operations and gates at various airports; and one of three hubs: Philadelphia, Pittsburgh or Charlotte, N.C. A number of airlines signed confidentiality agreements yesterday with US Airways in return for being allowed to see the deals that Morgan Stanley is offering, according to people who have been briefed on the arrangements. The group is thought to include both mainline carriers and low-fare airlines. "They're in contact with everyone," someone briefed on the discussions said. Meetings between the potential bidders and US Airways are expected to begin as soon as next week. US Airways' board is scheduled to meet in February to discuss the airline's next steps. Mr. Bronner, who is also the chief executive of Retirement Systems of Alabama, a big pension fund that is the airline's largest shareholder, said that US Airways was in danger of defaulting on the covenants of its federally guaranteed loans. The loans, which were awarded by the Air Transportation Stabilization Board last spring, were the centerpiece of a $1 billion restructuring plan. If US Airways fails to comply with its loan covenants, it would be the first time a major airline reneged on its commitments to the loan board, which was formed after the September 2001 attacks to administer bailouts to the nation's airlines. Mr. Bronner has pledged that the airline will avoid that fate. But it must cut $200 million to $300 million in costs, or raise an equivalent amount of cash, in the next 60 to 90 days. The rating reflected the airline's "weak financial profile, vulnerability to increasing competition from low-cost airlines, and a relatively limited route structure," said Philip Baggaley, S.& P.'s airline analyst. Mr. Baggaley questioned whether US Airways would be able to meet the loan covenants, which include a requirement that the airline have slightly more than $1 billion in unrestricted cash on hand on June 30; the airline has been losing about $1 million a day. In a letter to employees, the US Airways chief executive, David N. Siegel, said yesterday that the airline ended the year with $1.29 billion in cash. He said the airline "cannot fritter that money away, and we cannot fool ourselves into thinking we can simply spend that money, hoping the world gets better." Mr. Siegel also said it was not unusual for companies to examine strategic alternatives, adding that if there were strategic partnerships that would help the airline, "we will examine them as well." Even if it can sell assets - like the East Coast shuttle service or one of its hub operations - or generate enough business to keep its cash cushion, Mr. Baggaley said it might still fail to meet other covenants, including one requiring a certain ratio of debt to operating cash. "If they simply continue on the current course and don't renegotiate them, I'd think there is a better than 50 percent chance that they won't be able to meet the covenants," Mr. Baggaley said. If the company cannot, the loan board has the right to demand immediate payment of the loans, according to federal bankruptcy court documents that accompanied the loan guarantees. Even so, the board said in the documents that it would make itself "reasonably available to consult in good faith" on ways a default could be avoided. Mr. Baggaley said he expected the airline would be able to reach new terms with the loan board, perhaps agreeing to pay its debt more quickly. "I don't think the A.T.S.B. is eager to shut them down," he said, "but they would like to see the company take some self-help measures." http://www.nytimes.com/2004/01/10/business/10air.html?ex=1074753136&ei=1&en=8b22a01fafbdf729 --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! 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