Company / Analytics

Analytics, 23 June 2020

American Airlines is raising $3.5B in funding

American Airlines Group plans to sell shares and convertible senior notes due in 2025 to raise $3.5 billion to ease the liquidity crisis caused by the Coronavirus pandemic.

The Situation

On Sunday, the airline proposed a public offering of $750 million of its common stock as well as $750 million worth of convertible senior notes due 2025. Both the stock and notes offerings include a 30-day option for the underwriters to purchase, in whole or in part, up to $112.5 million of additional common shares and $112.5 million of additional convertible notes.

On a separate note, American Airlines also announced a private offering of $1.5 billion in senior secured notes due 2025. The company also plans to enter into a new $500 million term loan facility due in 2024.

Goldman Sachs, Citigroup, Bank of America, and J.P. Morgan will act as the joint active book-runners and as representatives of the underwriters for the Common Stock Offering and the Convertible Notes Offering. The Company has filed a registration statement (including a prospectus) with the SEC as well as preliminary prospectus supplements with respect to each of the offerings to which this communication relates. Investors are advised to carefully read the applicable preliminary prospectus supplement and the prospectus in that registration statement and other documents the company has filed with the SEC for more complete information about the Company and these offerings.

The Significance

American Airlines intends to use the funds raised for “general corporate purposes” and to enhance the carrier’s liquidity position.

A part of the proceeds from the sale and the borrowings will also be used to refinance the airlines’ delayed draw term loan facility scheduled for March 2021.

American Airlines is following a trend set by other airlines. In April, Southwest Airlines mopped up $4 billion by selling 70 million shares, and a further $2 billion by selling convertible notes due in 2025. United Airlines has also raised over $1 billion in share sales during the pandemic.

American Airlines and Delta Air Lines said last week that a modest recovery in demand was helping to slow daily cash burn rates in June after the U.S. government reported record low passenger numbers in April amid the coronavirus pandemic. But fears of a second-wave of infections could create more turbulence, adding to the impact of the COVID-19 in the airline industry.

How the stock moved

American Airlines shares traded 1.38% lower at $15.78 in the after-hours session on Friday. The shares had closed the regular session 2.97% lower at $16.

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