Frontier Airlines, Inc 8K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 18, 2003
FRONTIER AIRLINES, INC
(Exact name of Registrant as specified in its charter)
Colorado 0-24126 84-1256945
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
Incorporation)
7001 Tower Road, Denver, CO 80249
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (720) 374-4500
Not Applicable
(Former name or former address, if changed since last report)
Item 5. Other Events and Regulation FD Disclosure
Frontier Airlines, Inc. (Frontier) announced on Friday, February 14, 2003, that it had
closed a $70 million commercial loan facility supported by a $63 million guarantee of the Air Transportation
Stabilization Board. This filing provides additional details regarding the loan.
The loan was drawn under several notes in an aggregate amount of $70 million, and was provided
primarily by WestLB AG, with participation by Wells Fargo Bank, N.A. The term of the loan is just
over 52 months, with a final maturity date of June 30, 2007. Repayment is to be completed through
14 consecutive quarterly installments of approximately $2,642,900, with the first installment
due on December 31, 2003, and a final balloon payment of $33,000,000 due on the final maturity date.
The ATSB guaranteed repayment of $63 million of the loan, and two other parties each guaranteed
repayment of an additional $3,150,000. Under the terms of the agreement, each guarantor is entitled to
annual guarantee fees based on the outstanding principal amount of the loan. The guarantee fees increase
during each of the first three years of the loan. Each note comprising the loan bears an interest rate
equal to three month LIBOR plus a specified margin. Taking into account the guarantee fees and the
floating rate of each note, the blended implicit interest rate on the $70 million loan at closing was
6.58% (excluding amortized upfront legal, consultant or agent fees, or the amortized value of the warrants).
The margin over three month LIBOR for the blended implicit rate increases during each year of the loan, by
approximately 50 basis points in year two, an additional 75 basis points in years three, and a further 75 basis
points in year four and thereafter.
As collateral for the loan, Frontier pledged to the lenders a security interest in certain
spare parts, engines, tools and equipment owned by Frontier. In addition, Frontier also pledged to
the lenders and each of the guarantors a security interest in its receivable of any Federal income tax refund
payable to the Company by the Internal Revenue Service for the Company's taxable year ending March 31, 2003.
Frontier is obligated to apply the first $10 million of the income tax refund to prepay a portion of the principal
of the loan.
The ATSB received warrants to purchase 3,450,551 shares of the Company's common stock and
each of the supplemental guarantors received warrants to purchase 191,697 shares of the Company's common stock.
Each warrant has an exercise price of $6.00 per share, subject to certain anti-dilution and other
adjustments, and each includes registration rights. The warrants expire seven years from the date of issue.
Under the loan agreement, Frontier agreed to certain covenants through the term of the loan. These
covenants relate to the Company's ongoing financial reporting and disclosure obligations, payment of taxes,
maintaining insurance, compliance with laws, and appraisal reports on the pledged collateral. The Company is
also subject to certain negative covenants with respect to liens, mergers, asset sales, and payment restrictions
upon certain events. The loan agreement contains financial covenants relating to the Company's cash position,
debt to earnings ratio, and debt to fixed charges ratio. Under these covenants, the Company's cash and cash
equivalents cannot fall below $25 million through September 30, 2004, or $75 million thereafter. The
ratio of Consolidated Indebtedness to EBITDAR, as defined in the loan agreement, must be greater than 7:1
through December 31, 2004 and 6:1 from January 1, 2005 through June 30, 2005, and the ratio of Consolidated
EBITDAR to Consolidated Fixed Charges, also defined in the loan agreement, must be greater than 1:1 through
December 31, 2004 and 1.10:1 thereafter.
Frontier President and Chief Executive Officer Jeff Potter and other members of senior management
will host a webcast conference call on Friday, Feb. 21, 2003 at 8:00 a.m. MST to discuss the loan. The
call is available via the World Wide Web on the airline's Web site at WWW.FRONTIERAIRLINES.COM on the
Investor Relations page.
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.
FRONTIER AIRLINES, INC.
Date: February 18, 2003 By:
Jeff S. Potter, President & CEO
By:
Paul H. Tate, CFO