American Airlines Announces $ 7.5 Billion Debt Sale to Repay Government Loans

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FILE PHOTO: American Airlines passenger planes populate a runway where they are parked due to flight cuts to slow the spread of coronavirus disease (COVID-19) at Tulsa International Airport in Tulsa, Oklahoma, the United States, March 23, 2020. REUTERS / Nick Oxford

(Reuters) – American Airlines Group Inc announced on Monday that it will sell $ 7.5 billion in bonds and leveraged loans supported by its loyalty program to repay US sovereign debt.

While U.S. airlines received billions in federal grants to cover labor costs last year, American also secured up to $ 7.5 billion in term loans from the U.S. Treasury Department to help tackle the coronavirus pandemic.

Under the agreement, announced Monday, American will issue approximately $ 5 billion of private debt due halfway through 2026 and 2029, and a $ 2.5 billion term credit facility.

Shares rose 2.4% in morning trading.

In January, the airline approved a $ 1 billion stock sale after starting a rolling $ 1 billion offering in October to increase liquidity.

The company’s subsidiary, American Airlines Inc and AAdvantage Loyalty IP Ltd – an indirectly owned subsidiary – intend to begin the offering.

Reporting by Sanjana Shivdas and Tracy Rucinski; Editing by Bernard Orr, Sriraj Kalluvila and Nick Zieminski

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