Please ensure Javascript is enabled for purposes of website accessibility

American Airlines Looks to Tap Equity and Debt Markets for More Financing

By Howard Smith – Jun 22, 2020 at 9:33AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The airline seeks another $3.5 billion in financing after saying it expects to end June with $11 billion in liquidity.

In a June 12 SEC filing, American Airlines Group (AAL 3.46%) said its cash burn rate would be better than expected for the month of June, at $40 million per day. It also said that it sought to have the burn rate to zero by the end of 2020. In that filing, the airline said it expected to have $11 billion in liquidity as of June 30. 

But apparently the company doesn't feel like that is sufficient. Yesterday, it announced it is seeking $3.5 billion in new financing through a combination of a common stock equity offering, as well as convertible note and bond offerings along with a new term loan facility. 

Man in a suit carrying a large rock labeled debt on his back up a mountain

Image source: Getty Images.

American has said it is seeing an uptick in demand, predicting domestic capacity will be at 55% of last year's level in July, compared to the 25% it recorded in May. The expected $11 billion in liquidity at the of June includes $5.8 billion in federal aid from the Payroll Support Program (PSP) portion of the CARES Act, as well as another $4.75 billion loan from the U.S. Treasury it expects to receive this month. 

The new financing includes $1.5 billion of senior secured notes due in 2025, plus a new $500 million term loan facility. The company said it plans to use some of the proceeds and borrowings to refinance a previous term loan facility that is due to expire in March 2021. The remainder of the new financing is comprised of a common stock offering, and convertible notes offering, totaling $1.5 billion. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

American Airlines Group Inc. Stock Quote
American Airlines Group Inc.
$12.27 (3.46%) $0.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.