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American Opens $1.5 Billion Fundraising Round

American Airlines is hopeful a new fundraising round will help them maintain their goal of $11 billion in liquidity in the second quarter of 2020. The company’s three-pronged approach will see the offering of common stock, senior convertible notes, and refinancing of a loan from March 2020.  

American Airlines wants to raise a total of $1.5 billion through the sale of common stock and convertible senior notes, as the carrier looks to maintain liquidity. The carrier intends to sell a total of $750 million in common stock, and $750 million in convertible notes due 2025.

Fundraising Takes Forms of Stock, Notes and Loans

American’s latest fundraising round will take three different forms. The first is the offering of common stock and convertible senior notes. Under the deal, underwriters Goldman Sachs, BofA Securities and J.P. Morgan would have the first rights at the securities, given a 30-day option to purchase up to $112.5 million of both stock and convertible notes. The rest would be offered to the public through the three joint active book-runners.

“The Company expects to use the net proceeds from the Common Stock Offering and the Convertible Notes Offering for general corporate purposes and to enhance the Company’s liquidity position,” the airline stated in a press release. “The closing of neither the Common Stock Offering nor the Convertible Notes Offering is conditioned upon the closing of the other offering.”

In turn, some of the convertible notes would be used to finance a $500 million Term Loan B Facility, due in 2024. In addition, the notes would allow American to refinance a loan American took in March 2020.

The fundraising round comes as the airline struggles with fallout from the COVID-19 pandemic. In April, American announced they lost $2.2 billion during the first quarter of 2020. The drop was directly tied to the novel Coronavirus outbreak, as states closed and employees moved to work from home. During this time, the airline accepted $10 billion in support from the CARES Act, including $5.8 billion in payroll support and $4.75 billion loan option from the United States Treasury.

Expected $11 Billion in Liquidity in Second Quarter 2020

With the fundraising rounds on the books, American noted they anticipate having $11 billion in liquidity during the second quarter. Despite this, the airline is still being cautious about how they approach their near-future finances. Speaking at Bernstein Strategic Decisions Conference on May 29, 2020, airline chief executive Doug Parker noted the airline was flying 20 percent of their total schedule at the time.

“So we recognize we’re a long way off from the full recovery but we certainly believe the worst is behind us and we’re on the uptick,” Parker said in prepared remarks. “We have a lot of difficult work ahead but our teams fully engaged and focused on getting through this period of uncertainty, and we’re confident that through the dedication of our team and the actions we’ve taken that American will emerge from this crisis in a stronger and better position and that’s what we intend to do.”

To cut costs and reduce expenses, Parker noted American stopped all non-essential hiring, stopped pay raises, and began voluntary leave and early retirement packages. As of April 30, 2020, the Dallas Morning News reports around 39,000 American employees accepted one of the leave packages.

The airline is also accelerating the retirement of four aircraft types in its fleet: the Embraer 190, the Boeing 707, the Boeing 767 and the Airbus A330-300. This will cut the number of aircraft expected to fly in 2021 by 100.

fotographer June 23, 2020

and reducing any benefit of sitting in F, except for a larger seat

757FO June 22, 2020

Respectfully, AA hasn't flown the 707 in 40 years.