American Airlines Group plans to raise $3.5 billion in new financing, a move that seeks to boost its liquidity amid the global COVID-19 pandemic.
The airline outlines its plans as follows:
- $1.5 billion in senior secured notes due in 2025
- $750 million in senior convertible notes due in 2025
- Sell $750 million in shares
- Enter a $500 million Term Loan B Facility due in 2024
According to Bloomberg’s June 19 report, the junk bonds were expected to carry a yield of 11%. However, American Airlines now says that the final terms and amounts of the notes and the Term Loan are subject to market and other conditions.
The stock and convertible notes offerings include a 30-day option for the underwriters to purchase up to $112.5 million of additional common shares, and up to $112.5 million of additional convertible notes, respectively.
Market Watch reports that Goldman Sachs, Citigroup, BofA Securities, and JP Morgan will be acting as representatives for the underwriters.
Early this month, S&P Global Ratings downgraded American Airlines credit to B-, which is the lowest rating among its airline peers.
According to S&P, the carrier’s rating remains negative, seeing that it is now six notches deep into speculative-grade, or “junk” territory. The credit rating agency also maintained its assessment of liquidity at “less than adequate,” reiterating the expectation of a “substantially negative level of cash generation” over the next one year.
American Airlines is the world’s largest airline when measured by fleet size, scheduled passengers carried, and revenue passenger mile. American, together with its regional partners, operates an extensive international and domestic network with almost 6,800 flights per day to nearly 350 destinations in more than 50 countries.
The airline posted a $2.2 billion net loss in the first quarter of 2020, its first quarterly loss since emerging from bankruptcy in 2013. The loss is a shift from $185 million profit recorded in the same period last year. It incurred losses of $2.65 per share in the quarter on revenue of $8.52 billion, against its target of $2.33-per-share loss on revenue of $8.9 billion.
See Also:
