American Airlines Stock Battered Again as Company Adds $500 Million to Capital Raise

Shares in American Airlines Group Inc. (NASDAQ: AAL) dropped by about 6.8% on Monday following the company’s announcement that it planned to raise $3.5 billion in fresh liquidity

through the sale of common stock, convertible notes, senior secured notes and a new term loan. The company reportedly has raised the stakes, bringing the total capital raise to $4 billion.

American has added $250 million to its planned offering of common stock, bringing the total of new stock in the deal to $1 billion. The airline also has added $250 million to the convertible bond offering, as well as lifting the total for that portion of the deal to $1 billion.

According to a report from Bloomberg News, the common stock will be offered at $13.50 per share, a discount of 15.6% to the stock’s closing price on Friday before the offering was announced. The stock closed at $14.92 on Monday and traded down nearly 5% at around $14.15 in Tuesday’s premarket.

Citing unnamed sources, Bloomberg said the convertible notes are expected to pay a 6.5% coupon and a 20% conversion premium.

The $1.5 billion in senior secured notes are expected to be junk-rated (lower than Baa3 at Moody’s and BBB− at S&P and Fitch Ratings).

In a preliminary filing with the U.S. Securities and Exchange Commission on Monday, American said it expects second-quarter revenue to be down by 90% year over year and total capacity to be down by 75%.

The company also noted that it had lowered its cash burn from $100 million a day in April to approximately $40 million a day in June.

American continues to expect a $4.75 billion federal CARES Act loan to close this month. If the airline secures the loan, it will have total liquidity of $11 billion at the end of June, not including the debt transactions currently being offered.

The $1.5 billion in senior secured notes and the term loan are being secured by American’s “diverse pool of certain slots, gates and routes collateral” at and between domestic and international airports.

American’s stock traded down about 5.4% at $14.12 in Tuesday’s premarket. Its 52-week trading range is $8.25 to $34.99, and the consensus 12-month price target is $14.18. The airline’s dividend yield is 2.5%.