American Airlines pays gov’t loan with new $10bn financing

American Airlines (AA, Dallas/Fort Worth) parent American Airlines Group has secured USD10 billion in fresh financing backed by its AAdvantage loyalty scheme, immediately using part of the proceeds to prepay a loan it accepted last year from the United States Treasury Department, it detailed in an SEC filing on March 24. American Airlines Group and AAdvantage Loyalty IP Ltd completed on March 24 a previously announced offering of USD3.5 billion in 5.5% Secured Senior Notes due in 2026, as well as an offering of USD3 billion in 5.75% Senior Secured Notes due in 2029. At the same time, the airline entered into a term loan facility worth a further USD3.5 billion. The company used about USD550 million of the net proceeds from this AAdvantage financing to prepay all of the amounts outstanding under the Loan and Guarantee Agreement, entered into on September 25, 2020, with the Treasury under the federal CARES Act framework. As previously reported, USD5.48 billion was initially made available to American Airlines on that date, of which it quickly drew the first tranche of USD550 million. The term of the loans under the facility was five years. As dictated by the conditions of that loan deal, American also issued to the Treasury Department warrants to purchase up to 4,396,483 shares of the group’s common stock at USD12.51 per share. As of March 24, however, American has prepaid the USD550 million and terminated the loan agreement. “Our industry was in danger of shutting down one year ago when the CARES Act was passed. This important legislation […] stabilised our industry and kept our workforce intact,” chairman and chief executive Doug Parker said in a statement. He added: “American couldn’t have borrowed USD7.5 billion against AAdvantage during the uncertainty of 2020, but the CARES Act provided the bridge that allowed us to efficiently raise USD10 billion through the public markets earlier this month. We wouldn’t be in the position we’re in today without that bipartisan [political] support, and it is something we will never take for granted.”