American Airlines 2006 Annual Report Download - page 66

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5. Leases (Continued)
Rent expense, excluding landing fees, was $1.4 billion, $1.3 billion and $1.3 billion in 2006, 2005 and 2004,
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 84 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, 2006, future lease
payments required under these leases totaled $2.3 billion.
6. Indebtedness
Long-term debt consisted of (in millions):
December 31,
2006 2005
Secured variable and fixed rate indebtedness due through 2021
(effective rates from 5.41% - 11.36% at December 31, 2006) $ 6,000 $ 6,473
Enhanced equipment trust certificates due through 2012
(rates from 3.86% - 12.00% at December 31, 2006) 2,968 3,424
6.0% - 8.5% special facility revenue bonds due through 2036 1,697 1,697
Credit facility agreement due through 2010
(effective rate of 8.60% at December 31, 2006) 740 788
4.25% - 4.50% senior convertible notes due 2023 – 2024 619 619
9.0% - 10.20% debentures due through 2021 213 320
7.88% - 10.55% notes due through 2039 226 286
12,463 13,607
Less current maturities 1,246 1,077
Long-term debt, less current maturities $ 11,217 $ 12,530
Maturities of long-term debt (including sinking fund requirements) for the next five years are: 2007 - $1.2 billion;
2008 - $702 million; 2009 - $1.6 billion; 2010 - $1.4 billion; 2011 – $2.2 billion.
In March 2006, American refinanced its bank credit facility. The credit facility consists of a $295 million senior
secured revolving credit facility and a $445 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 2.50 percent to 4.00 percent per annum, in the case of LIBOR advances, and
from 1.50 percent to 3.00 percent per annum, in the case of base rate advances, depending upon the senior
secured debt rating of the Credit Facility. Based on ratings as of December 31, 2006, the applicable margin with
respect to the Revolving Facility is 3.00 percent per annum in the case of LIBOR advances, and 2.00 percent per
annum in the case of base rate advances. The applicable margin with respect to the Term Loan Facility is 3.25
percent per annum in the case of LIBOR advances, and 2.25 percent per annum in the case of base rate
advances. As of December 31, 2006, the Credit Facility was fully drawn and had an effective interest rate of 8.60
percent. The interest rate is reset at least every six months based on the current LIBOR rate election.
The Revolving Facility amortizes at a rate of $10 million quarterly through December 17, 2007 and has a final
maturity of June 17, 2009. Principal amounts repaid under the Revolving Facility may be re-borrowed, up to the
then-available aggregate amount of the commitments.