UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Securities registered pursuant to Section 12(b) of the Act:
| Registrant | Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | |||
| United Airlines Holdings, Inc. | ||||||
| United Airlines, Inc. | None | None | None |
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Item 1.01 Entry into a Material Definitive Agreement.
Payroll Support Program Agreement
As previously reported, United Airlines Holdings, Inc. (“UAL”) and United Airlines, Inc., a wholly-owned subsidiary of UAL (“United” and, together with UAL, the “Company”) submitted an application to the U.S. Treasury Department pursuant to the Payroll Support Program established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
On April 20, 2020, in connection with the Payroll Support Program, United entered into a Payroll Support Program Agreement (the “PSP Agreement”) with the U.S. Treasury Department providing the Company with total funding of approximately $5.0 billion.
Pursuant to the PSP Agreement, United and its affiliates will be required to comply with certain provisions of the CARES Act, including, among others, the requirement that all funds provided under the Payroll Support Program will be used by UAL exclusively for the continuation of payment of its employee wages, salaries and benefits; requirements to maintain employment levels through September 30, 2020; provisions prohibiting certain reductions in employee wages, salaries and benefits; provisions prohibiting the payment of dividends and the repurchase of certain equity until September 30, 2021; audit and reporting requirements; provisions to comply with certain continuation of service requirements until March 1, 2022; and provisions restricting the payment of certain executive compensation until March 24, 2022.
Promissory Note
On April 20, 2020, UAL issued a promissory note (the “PSP Note”) to the U.S. Treasury Department evidencing senior unsecured indebtedness of UAL in the initial principal amount of approximately $714.0 million. The principal amount of the PSP Note will increase in an amount equal to 30% of any disbursement made by the U.S. Treasury Department to United under the PSP Agreement after the initial issuance date. The aggregate principal amount of the PSP Note after all disbursements will be approximately $1.5 billion.
The PSP Note will be guaranteed by United, and will mature ten years after issuance on April 20, 2030 (the “Maturity Date”). If any subsidiary of UAL (other than United) guarantees other indebtedness of UAL with a principal balance in excess of a specified amount, then the subsidiary shall be required to guarantee the obligations of UAL under the PSP Note. UAL may, at its option, prepay the PSP Note, at any time, and from time to time, at par. UAL is required to prepay the PSP Note upon the occurence of certain change of control triggering events. The PSP Note does not require any amortization, and is to be repaid in full on the Maturity Date.
Interest on the PSP Note is payable semi-annually in arrears on March 31 and September 30 of each year beginning on September 30, 2020 at a rate of 1.00% in years 1 through 5, and at the Secured Overnight Financing Rate (SOFR) plus 2.00% in years 6 through 10.
Warrant Agreement
In addition to the PSP Note, UAL also entered into a warrant agreement (the “Warrant Agreement”) with the U.S. Treasury Department on April 20, 2020, pursuant to which UAL will issue to the U.S. Treasury Department warrants to purchase up to approximately 4.6 million shares of common stock, pro rata in conjunction with increases to the principal amount outstanding under the PSP Note (the “Warrants”), with an initial issuance of warrants to purchase up to approximately 2.3 million shares of common stock. The Warrants will have a strike price of $31.50 per share (which was the closing price of UAL’s common stock on The Nasdaq Stock Market on April 9, 2020). The Warrants will expire five years after issuance, and are exercisable either through net share settlement in cash or in shares of common stock, at UAL’s option.
The Warrants contain customary anti-dilution provisions, registration rights and are freely transferrable. Pursuant to the terms of the Warrants, Warrant holders do not have any voting rights.
The foregoing descriptions do not purport to be complete and are qualified in their entirety by reference to each of the PSP Agreement, the PSP Note, the Warrant Agreement and the Form of Warrant. The PSP Note, the Warrant Agreement, the Form of Warrant and the PSP Agreement are attached as Exhibits 4.1, 4.2, 4.3 and 10.1, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information described under Item 1.01 is incorporated herein by reference to the extent responsive to Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information described under Item 1.01 is incorporated herein by reference to the extent responsive to Item 3.02.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit No. |
Description | |
| 4.1 | Promissory Note, dated as of April 20, 2020, among UAL, United, as guarantor, and the United States Department of the Treasury. | |
| 4.2 | Warrant Agreement, dated as of April 20, 2020, between UAL and the United States Department of the Treasury. | |
| 4.3 | Form of Warrant (included in Exhibit 4.2 as Annex B thereto). | |
| 10.1 | Payroll Support Program Agreement, dated as of April 20, 2020, between United and the United States Department of the Treasury. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITED AIRLINES HOLDINGS, INC. | ||
| UNITED AIRLINES, INC. | ||
| By: | /s/ Chris Kenny | |
| Name: | Chris Kenny | |
| Title: | Vice President and Controller | |
Date: April 23, 2020