American Airlines Group Inc (AAL) plans to sell shares and convertible senior notes due 2025 to raise $3.5 billion to ease the liquidity crisis during the pandemic.

What Happened

On Sunday, American Airlines proposed a public offering of $750 million of its common stock as well as $750 million worth of convertible senior notes due 2025.

Both the stock and notes offerings include a 30-day option for the underwriters to purchase, in whole or in part, up to $112.5 million of additional common shares and $112.5 million of additional convertible notes.

Separately, American Airlines announced a private offering of $1.5 billion in senior secured notes due 2025. The company also said it would enter into a new $500 million term loan facility due in 2024. 

Goldman Sachs Group Inc (GS), Citigroup Inc (C), Bank of America Corp's (BAC) investment banking division BofA Securities and JPMorgan Chase & Co (JPM) will act as representatives of the underwriters for both the offerings.

Why It Matters

According to American Airlines, the raised funds will be deployed for “general corporate purposes” and to enhance the carrier’s liquidity position. 

A part of the proceeds from the sale and the borrowings will be used to refinance the airlines’ delayed draw term loan facility scheduled for March 2021.

American Airlines is following Southwest Airlines Co (LUV), which mopped up $4 billion in its April sale of 70 million shares and a further $2 billion by selling convertible notes due in 2025.

United Airlines Holdings Inc (UAL) has also raised over $1 billion selling shares during the pandemic.

Price Action

American Airlines shares traded 1.38% lower at $15.78 in the after-hours session on Friday. The shares had closed the regular session 2.97% lower at $16.