Texas-based airline American Airlines is aiming to raise $3.5 billion in new financing through the sale of its shares of convertible senior notes. The world's largest airline, in terms of fleet size and revenue passenger mile, hopes to bolster its liquidity to get it through the expected continued slump in travel demand amid the coronavirus pandemic.
In a statement released on Sunday, the company stated that it will be issuing senior secured notes worth $1.5 billion that will mature in 2025. The airline added that it has already secured $500 million in new capital from a term loan facility that will be due on 2024.
American Airlines' is also including a 30-day option for its stock and convertible notes that would allow its underwriters to purchase additional common shares of up to $112.5 million and convertible notes of up to the same amount. The company has partnered with Bank of America Securities, JPMorgan, Citigroup, and Goldman Sachs for the transaction.
The added funds will be used for general corporate purposes and the continued operation of its business amid the demand slump. Similar to other forecasts, the company expects the demand slump to continue throughout the year.
Like other airline stocks, American Airlines' share prices have been on a nosedive since the start of the year due to the global pandemic. The company's stock prices have so far dropped by around 44 percent since January.
Analysts had forecasted that the recovery of the global travel industry to pre-pandemic levels will likely still take years. Before the pandemic, American Airlines continued to be one of the world's largest operators, with more than 6,800 flights per day to over 350 destinations in more than 50 countries.
After the pandemic hit, the airline was forced to significantly reduce its operations and ground most of its planes as the travel industry ground to a halt amid the government-imposed travel restrictions and border lockdowns.
Last week, the company stated that it has seen a slight uptick in travel demand as less affected countries ease their restrictions. American Airlines added that the modest recovery has at least managed to reduce its daily cash burn rates.
A report from Jefferies analysts predicts that global airline capacity could fall a further 70 percent next month. Without an effective vaccine, some countries may still choose to close their borders to international air travel. The rippling effect is expected to further drag travel and tourism-related companies further down throughout the year depending on the outcome of the global race to develop a treatment.
