NOTE 11 - DEBT


(In millions)	At December 31,
	2015		2014
Secured
Notes payable, fixed interest rates of 1.42% to 12.00% (weighted average rate of 5.37% as of December 31, 2015), payable through 2027	$	7,971	$	7,464
Notes payable, floating interest rates of the London Interbank Offered Rate (“LIBOR”) plus 0.20% to 2.85%, payable through 2027		1,302		1,151
Term loan, LIBOR subject to a 0.75% floor, plus 2.75%, or alternative rate based on certain market rates plus 1.75%, due 2019		875		884
Term loan, LIBOR subject to a 0.75% floor, plus 3.00%, or alternative rate based on certain market rates plus 2%, due 2021		194		499
Unsecured
6% Notes due 2026 to 2028 (a)		—		632
6% Senior Notes due 2020 (a)		300		300
6.375% Senior Notes due 2018 (a)		300		300
4.5% Convertible Notes due 2015		—		202
Other		100		101

		11,042		11,533

Less: unamortized debt discount, premiums and debt issuance costs		(145)		(267)	(b)
Less: current portion of long-term debt		(1,224)		(1,313)

Long-term debt, net	$	9,673	$	9,953

(a) UAL is the issuer of this debt. United is a guarantor.

(b) 2014 amount differs from the amount reported in the Company’s Form 10-K for the fiscal year ended December 31, 2014 due to the adoption of an accounting standard update in 2015. See Note 1(t) Recently Issued Accounting Standards of this report for additional information.

The table below presents the Company’s contractual principal payments at December 31, 2015 under then-outstanding long-term debt agreements in each of the next five calendar years (in millions):


2016	$	1,224
2017		822
2018		1,359
2019		1,788
2020		942
After 2020		4,907

	$	11,042

As of December 31, 2015, a substantial portion of the Company’s assets, principally aircraft, route authorities and loyalty program intangible assets, was pledged under various loan and other agreements. As of December 31, 2015, UAL and United were in compliance with their respective debt covenants. Continued compliance depends on many factors, some of which are beyond the Company’s control, including the overall industry revenue environment and the level of fuel costs.

Secured debt

2013 Credit and Guaranty Agreement. United and UAL are parties to a Credit and Guaranty Agreement (the “Credit Agreement”) as the borrower and guarantor, respectively. The Credit Agreement consists of a $900 million term loan due April 2019 (of which $875 million was outstanding as of December 31, 2015) (the “Term Loan due 2019”), a $500 million term loan due September 2021 (of which $194 million was outstanding as of December 31, 2015) (the “Term Loan due 2021”) and a $1.35 billion revolving credit facility, with $1.35 billion being available for drawing until April 2018 and $1.315 billion being available for drawing until January 2019.

The term loans under the Credit Agreement bear interest at a variable rate equal to LIBOR plus a margin of, in the case of the Term Loan due 2019, 2.75% per annum and, in the case of the Term Loan due 2021, 3.0% per annum, subject in each case to a 0.75% floor. Borrowings under the revolving credit facility of the Credit Agreement bear interest at a variable rate equal to LIBOR plus a margin of 3.0% per annum, or another rate based on certain market interest rates, plus a margin of 2.0% per annum. The principal amount of the term loans must be repaid in consecutive quarterly installments of 0.25% of the original principal amount thereof, with any unpaid balance due, in the case of the Term Loan due 2019, on April 1, 2019 and, in the case of the Term Loan due 2021, on September 15, 2021. United may prepay all or a portion of the term loans from time to time, at par plus accrued and unpaid interest. United pays a commitment fee equal to 0.75% per-annum on the undrawn amount available under the revolving credit facility.

The Term Loan due 2021 ranks pari passu with the Term Loan due 2019 that United originally borrowed under the Credit Agreement. The Credit Agreement requires United to repay the term loans and any other outstanding borrowings under the Credit Agreement at par plus accrued and unpaid interest if certain changes of control of UAL occur.

As of December 31, 2015, United had its entire capacity of $1.35 billion available under the revolving credit facility of the Company’s Credit Agreement.

As of December 31, 2015, United had cash collateralized $70 million of letters of credit. United also had $437 million of performance bonds relating to various real estate, customs and aircraft financing obligations at December 31, 2015. Most of the letters of credit have evergreen clauses and are expected to be renewed on an annual basis and the performance bonds have expiration dates through 2019.

EETCs. United has $7.8 billion principal amount of equipment notes outstanding issued under EETC financings included in notes payable in the table of outstanding debt above. Generally, the structure of these EETC financings consist of pass-through trusts created by United to issue pass-through certificates, which represent fractional undivided interests in the respective pass-through trusts and are not obligations of United. The proceeds of the issuance of the pass-through certificates are used to purchase equipment notes which are issued by United and secured by its aircraft. 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 United’s consolidated balance sheet because the proceeds held by the depositary are not United’s assets.

In November 2015 and August 2014, 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. United has received and recorded all of the proceeds from the November 2015 and August 2014 pass-through trusts as debt as of December 31, 2015. Certain details of the pass-through trusts with proceeds received from issuance of debt in 2015 are as follows (in millions, except stated interest rate):


EETC Date	Class	Principal		Final expected distribution date	Stated interest rate		Total debt recorded as of December 31, 2015		Proceeds received from issuance of debt during 2015		Remaining proceeds from issuance of debt to be received in future periods
November 2015	AA	$	334	December 2027		3.45%	$	334	$	334	$	—
November 2015	A		100	December 2022		3.70%		100		100		—
August 2014	A		823	September 2026		3.75%		823		711		—
August 2014	B		238	September 2022		4.625%		238		206		—

		$	1,495				$	1,495	$	1,351	$	—

In 2015, United borrowed approximately $590 million aggregate principal amount from various financial institutions to finance the purchase of several aircraft delivered in 2015. The notes evidencing these borrowings, which are secured by the related aircraft, have maturity dates ranging from 2025 to 2027 and interest rates comprised of the LIBOR plus a specified margin.

Unsecured debt

6% Notes due 2026. In 2015, UAL used cash to repurchase all $321 million par value 6% Notes due 2026 (the “2026 Notes”).

6% Notes due 2028. In 2015, UAL used cash to repurchase all $311 million par value 6% Notes due 2028 (the “2028 Notes”).

In 2015, the Company recorded a nonoperating special charge of $134 million for the extinguishment of the 2026 Notes and the 2028 Notes. The nonoperating special charge is related to the write-off of unamortized debt discounts.

4.5% Convertible Notes due 2015. The 4.5% Convertible Notes were convertible by holders into shares of UAL common stock at a conversion price of approximately $18.93 per share. During 2014, United used $62 million of cash to purchase and retire $28 million aggregate principal amount of its 4.5% Convertible Notes in market transactions. UAL recorded $34 million of the repurchase cost as a reduction of additional paid-in capital. In January 2015, the holders of substantially all of the remaining $202 million principal amount of the 4.5% Convertible Notes exercised their conversion option resulting in the issuance of 11 million shares of UAL common stock.

4.5% Senior Limited-Subordination Convertible Notes due 2021. In January 2014, holders of substantially all of the remaining $156 million outstanding principal amount of the 4.5% Senior Limited-Subordination Convertible Notes due 2021 exercised their right to convert such notes into approximately 5 million shares of UAL common stock.

Convertible Debt Securities and Derivatives. UAL, United and the trustee for the 4.5% Convertible Notes were parties to a supplemental indenture that made United’s convertible debt convertible into shares of UAL common stock. For purposes of United separate-entity reporting, as a result of the remaining outstanding debt having been convertible into the stock of a non-consolidated entity, the embedded conversion options in United’s convertible debt were required to be separated and accounted for as though they were free-standing derivatives.

In addition, UAL’s contractual commitment to provide common stock to satisfy United’s obligation upon conversion of the debt was an embedded call option on UAL common stock that was also required to be separated and accounted for as though it were a free-standing derivative. The fair value of the indenture derivative on a separate-entity reporting basis as of December 31, 2014 was an asset of $712 million. The fair value of the embedded conversion options as of December 31, 2014 was a liability of $511 million. The 4.5% Convertible Notes and their related indenture derivative and conversion options were retired in 2015. The initial contribution of the indenture derivatives to United by UAL was accounted for as additional paid-in capital in United’s separate-entity financial statements. Changes in fair value of both the indenture derivative and the embedded conversion options subsequent to October 1, 2010 were recognized in Nonoperating income (expense).

6% Convertible Senior Notes due 2029. In 2014, UAL issued approximately 12 million shares of UAL common stock in exchange for, or upon conversion of, $104 million in aggregate principal amount of UAL’s outstanding 6% Convertible Senior Notes due 2029 held by the holders of these notes.

The collateral, covenants and cross default provisions of the Company’s principal debt instruments that contain such provisions are summarized in the table below:


Debt Instrument		Collateral, Covenants and Cross Default Provisions
Various equipment notes and other notes payable		Secured by certain aircraft. The indentures contain events of default that are customary for aircraft financing, including in certain cases cross default to other related aircraft.
Credit Agreement		Secured by certain of United’s international route authorities, specified take-off and landing slots at certain airports and certain other assets. The Credit Agreement requires the Company to maintain at least $3.0 billion of unrestricted liquidity at all times, which includes unrestricted cash, short-term investments and any undrawn amounts under any revolving credit facility, and to maintain a minimum ratio of appraised value of collateral to the outstanding obligations under the Credit Agreement of 1.67 to 1.0 at all times. The Credit Agreement contains covenants that, among other things, restrict the ability of UAL and its restricted subsidiaries (as defined in the Credit Agreement) to incur additional indebtedness and to pay dividends on or repurchase stock, although the Company currently has ample ability under these restrictions to repurchase stock under the Company’s share repurchase program. The Credit Agreement contains events of default customary for this type of financing, including a cross default and cross acceleration provision to certain other material indebtedness of the Company.
6.375% Senior Notes due 2018 6% Senior Notes due 2020		The indentures for these notes contain covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries (as defined in the indenture) to incur additional indebtedness and pay dividends on or repurchase stock, although the Company currently has ample ability under these restrictions to repurchase stock under the Company’s share repurchase program. The indentures contain events of default that are customary for similar financings.