NOTE 9 - DEBT

As of June 30, 2014, a substantial portion of our assets is pledged as collateral for our debt. These assets principally consist of aircraft, route authorities and loyalty program intangible assets. As of June 30, 2014, the Company was in compliance with its debt covenants.

4.5% Convertible Notes. During the second quarter of 2014, UAL used cash to purchase and retire $28 million aggregate principal amount of its 4.5% Convertible Notes in market transactions. As of June 30, 2014, the outstanding balance is $202 million.

6% Convertible Senior Notes. During the three months ended March 31, 2014, UAL issued approximately five million additional shares of UAL common stock in exchange for, or upon conversion of, $46 million in aggregate principal amount of UAL’s outstanding 6% convertible senior notes due 2029 held by the holders of these notes. As of June 30, 2014, the outstanding balance is $58 million.

8% Notes Due 2024. UAL redeemed in cash at par value all $400 million aggregate principal amount of its 8% Notes due 2024 on January 17, 2014.

4.5% Senior Limited-Subordination Convertible Notes. In June 2011, UAL repurchased at par value approximately $570 million of the $726 million outstanding principal amount of its 4.5% Notes with cash after notes were put to UAL by the noteholders. In the first quarter of 2014, holders of substantially all of the remaining $156 million outstanding principal amount of the 4.5% Notes exercised their right to convert such notes into approximately five million shares of UAL common stock at a conversion rate of 30.6419 shares of UAL common stock per $1,000 principal amount of 4.5% Notes.

2013 Credit and Guaranty Agreement. The Credit Agreement consists of a $900 million term loan due April 1, 2019 and a $1.0 billion revolving credit facility available for drawing until April 1, 2018. As of June 30, 2014, United had its entire capacity of $1.0 billion available under the revolving credit facility of the Company’s Credit Agreement. In March 2014, United amended the Credit Agreement to reduce the interest rate payable on the existing $893 million term loan from LIBOR plus a margin of 3.0% per annum to LIBOR plus a margin of 2.75% per annum, subject to a 0.75% floor.

See Note 11 in the 2013 Annual Report for additional information on the terms of the Credit Agreement.

EETCs. In April 2014 and August 2013, United created separate EETC pass-through trusts, each of which issued pass-through certificates. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes issued by United and secured by its aircraft. The Company records the debt obligation upon issuance of the equipment notes rather than upon the initial issuance of the pass-through certificates. The pass-through certificates represent fractional undivided interests in the respective pass-through trusts and are not obligations of United. The payment obligations under the equipment notes are those of United. Proceeds received from the sale of pass-through certificates are initially held by a depositary in escrow for the benefit of the certificate holders until United issues equipment notes to the trust, which purchases such notes with a portion of the escrowed funds. These escrowed funds are not guaranteed by United and are not reported as debt on our consolidated balance sheet because the proceeds held by the depositary are not United’s assets. United expects to receive all proceeds from these pass-through trusts by the end of 2014. Certain details of the pass-through trusts are as follows (in millions, except interest rate):


EETC Date	Class	Principal		Final expected distribution date	Stated interest rate		Total debt recorded as of June 30, 2014		Proceeds received from issuance of debt in the six months ended June 30, 2014		Remaining proceeds from issuance of debt to be received in future periods
April 2014	A	$	736	April 2026		4.0%	$	248	$	248	$	488
April 2014	B		213	April 2022		4.75%		72		72		141
August 2013	A		720	August 2025		4.3%		720		567		—
August 2013	B		209	August 2021		5.375%		209		165		—

		$	1,878				$	1,249	$	1,052	$	629

The table below presents contractual principal payments at June 30, 2014 under then-outstanding long-term debt agreements in each of the next five calendar years (in millions):


	UAL		United
Last six months of 2014	$	518	$	518
2015		2,070		2,070
2016		1,114		1,114
2017		677		677
2018		1,201		1,201
After 2018		6,096		6,038

	$	11,676	$	11,618