Travel Restrictions Push Airline to Sell Shares

Travel Restrictions Push Airline to Sell Shares

(FinancialHealth.net) – As you can imagine, air travel took a big hit during the coronavirus outbreak. The idea of flying has frightened many Americans worried about contracting the virus and spreading it to their loved ones. Transportation Department data released in March found a drop of more than 50% in the number of people traveling by plane; In May, it was down 94%. As a result, some companies are struggling to stay alive.

On June 21, American Airlines Group Inc. announced it was selling convertible senior notes and shares to raise $1.5 billion in private sales.

For people who haven’t heard the term before, a convertible senior note is a debt security that an investor can convert into a predefined amount of the issuer’s shares. According to Investopedia, they take priority over other securities offered by the company.

The goal of American Airlines’ sell-off is to improve the liquidity of the company as it tries to wade through the financial mess left in the wake of the COVID-19 pandemic. Investors will have a 30-day option that allows them to buy up to $112.5 million additional notes or shares.

The company is also offering $750 million in both convertible debt and common stock publicly, and it’s entered into a $500 million loan facility that’s due in 2024. In all, it’s trying to raise $3.5 billion.

The news caused the airlines’ stock to drop on Wall Street.

All of the big four airlines (Delta, American, Southwest, and United) are taking a beating. Hopefully, as the country opens back up, they’ll start to recover financially — especially considering how many jobs are tied to each of the companies.

~Here’s to Your Financial Health!

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