American Airlines 2004 Annual Report Download - page 62

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5. Leases (Continued)
Rent expense, excluding landing fees, was $1.3 billion, $1.4 billion and $1.6 billion in 2004, 2003 and 2002,
respectively.
American has determined that it holds a significant variable interest in, but is not the primary beneficiary of, certain
trusts that are the lessors under 87 of its aircraft operating leases. These leases contain a fixed price purchase
option, which allows American to purchase the aircraft at a predetermined price on a specified date. However,
American does not guarantee the residual value of the aircraft. As of December 31, 2004, future lease payments
required under these leases totaled $2.9 billion.
6. Indebtedness
Long-term debt consisted of (in millions):
December 31,
2004 2003
Secured variable and fixed rate indebtedness due through 2021
(effective rates from 2.03% - 9.16% at December 31, 2004) $ 6,340 $ 6,041
Enhanced equipment trust certificates due through 2011
(rates from 2.14% - 9.09% at December 31, 2004) 3,707 3,747
6.0% - 8.5% special facility revenue bonds due through 2036 946 947
Credit facility agreement due through 2010
(temporary average rate of 9.15% at December 31, 2004) 850 -
4.25% - 4.50% senior convertible notes due 2023 – 2024 619 300
9.0% - 10.20% debentures due through 2021 330 330
7.88% - 10.55% notes due through 2039 303 303
Credit facility agreement due in 2005 - 834
Other -2
13,095 12,504
Less current maturities 659 603
Long-term debt, less current maturities $ 12,436 $ 11,901
Maturities of long-term debt (including sinking fund requirements) for the next five years are: 2005 - $659 million;
2006 - $1.3 billion; 2007 - $1.2 billion; 2008 - $621 million; 2009 - $1.7 billion.
On December 17, 2004, American refinanced its $834 million bank credit facility, which was scheduled to mature
in December 2005. The total amount of the new credit facility is $850 million. The new credit facility consists of a
$600 million senior secured revolving credit facility and a $250 million term loan facility (the Revolving Facility and
the Term Loan Facility, respectively, and collectively, the Credit Facility). Advances under either facility can be
designated, at American’s election, as LIBOR rate advances or base rate advances. Interest accrues at the LIBOR
rate or base rate, as applicable, plus, in either case, the applicable margin. The applicable margin with respect to
the Revolving Facility can range from 3.25 percent to 5.25 percent per annum, in the case of LIBOR advances,
and from 2.25 percent to 4.25 percent per annum, in the case of base rate advances, depending upon the senior
secured debt rating of the Credit Facility. As of December 31, 2004, the Credit Facility was fully drawn and had a
temporary average interest rate of 9.15 percent as required by the debt agreement. The interest rate was reset on
January 14, 2005, resulting in a new average interest rate of 7.75 percent. The interest rate will be reset at least
every six months based on the current LIBOR rate election.
The Revolving Facility matures on June 17, 2009. Commitments under the Revolving Facility will be reduced on a
quarterly basis over a period of 4.5 years, with $15 million (or 2.5 percent) of the commitments being reduced in
each of the first twelve quarters and the remainder due at maturity. Principal amounts repaid under the Revolving
Facility may be re-borrowed, up to the then-available aggregate amount of the commitments.