American Airlines 2004 Annual Report Download - page 26

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23
The Credit Facility contains a covenant requiring American to maintain, as defined, unrestricted cash,
unencumbered short term investments and amounts available for drawing under committed revolving credit
facilities of not less than $1.5 billion for each quarterly period through September 30, 2005 and $1.25 billion for
each quarterly period thereafter. In addition, the Credit Facility contains a covenant requiring AMR to maintain a
ratio of cash flow (defined as consolidated net income, before interest expense (less capitalized interest), income
taxes, depreciation and amortization and rentals, adjusted for certain gains or losses and non-cash items) to fixed
charges (comprising interest expense (less capitalized interest) and rentals) of at least the amount specified below
for each period of four consecutive quarters ending on the dates set forth below:
Four Quarter Period Ending Cash Flow Coverage Ratio
December 31, 2004 0.90:1.00
March 31, 2005 0.85:1.00
June 30, 2005 0.85:1.00
September 30, 2005 0.90:1.00
December 31, 2005 1.10:1.00
March 31, 2006 1.20:1.00
June 30, 2006 1.25:1.00
September 30, 2006 1.30:1.00
December 31, 2006 1.30:1.00
March 31, 2007 1.35:1.00
June 30, 2007 1.40:1.00
September 30, 2007 1.40:1.00
December 31, 2007 1.40:1.00
March 31, 2008 (and each fiscal quarter
thereafter) 1.50:1.00
American and AMR were in compliance with these covenants as of December 31, 2004 and expect to be able to
continue to comply with these covenants, but there are no assurances that they will be able to do so through the
expiration of the facility. Failure to comply with these covenants would result in a default under the Credit Facility
which - - if the Company did not take steps to obtain a waiver of, or otherwise mitigate, the default - - could result
in a default under a significant amount of the Company’s other debt.
See Note 6 to the consolidated financial statements for more information regarding the Credit Facility.
Financing Activity
The Company, or its subsidiaries, issued the following debt during the year ended December 31, 2004 (in
millions):
7.25% secured notes due 2009 $ 180
4.50% senior convertible notes due 2024 (net of discount) 319
Credit facility * 850
Various debt agreements related to the purchase of
regional jet aircraft (effective interest rates ranging up to
5.35%) (various maturities through 2021) (net of
discount) 646
$ 1,995
* In December 2004, American refinanced its $834 million bank credit facility with the $850 million Credit
Facility listed above.
See Note 6 to the consolidated financial statements for additional information regarding the debt issuances listed
above.