After markets closed Tuesday, United Airlines Holdings (UAL 1.12%) filed to raise about $1 billion in a secondary offering designed to help fortify its balance sheet.
The airline said it would sell 39.25 million shares, with underwriters Morgan Stanley and Barclays retaining an option to purchase an additional 3.925 million shares. The price was not disclosed, but Bloomberg reported the shares are being offered in a range of $25.95 to $26.50 apiece.
United shares closed at $27.88 on Tuesday, but secondary offerings are often priced at a discount to the trading price. The company's shares fell about 3% in after-hours trading.
United is selling low, with the airline's shares off 68% year to date. The company had about 247.26 million shares outstanding as of Dec. 31, 2019.
Image source: Getty Images.
Airlines have been hit hard by the COVID-19 pandemic, with travel demand off by more than 90% year over year. United on Monday preannounced a preliminary first-quarter loss of $2.1 billion, well above the $459 million analyst consensus, due in part to a $1 billion special charges tied to a decline in the value of United's investment in Colombia's Avianca Holdings.
In addition to selling shares, United expects to take in about $5 billion in funding through the U.S. government's payroll support program, including a $1.5 billion loan with an interest rate of 1% in the first five years. It also intends to apply to borrow another $4.5 billion from the U.S. Treasury as part of a separate $25 billion program, but executives have warned employees that if travel does not return by the fall, significant layoffs are possible.
