American Air receives $5.48b Treasury loan in upsized deal

Bloomberg

American Airlines Group Inc closed a $5.48 billion loan with the US Treasury, increasing its pool of cash to help fund operations until travel demand begins to return.
The credit facility, backed by American’s loyalty program, increased from an original $4.75 billion target after rivals such as Delta Air Lines Inc and Southwest Airlines opted out of the funds and the remaining money was reallocated.
American could receive as much as $2 billion more when the funds are adjusted a second time next month, according to a regulatory filing.
The deal makes American the first major carrier to tap US loans that were included in the $2 trillion Cares Act for economic relief from the coronavirus pandemic.
As part of the federal rescue, US airlines earlier got $25 billion in payroll support, largely in grants, with American receiving $5.8 billion.
Congress is debating whether to extend the payroll aid, which expires at the end of the month, in an effort to avoid deep industry layoffs.
“We are working to raise and conserve as much cash as
possible during the Covid-19 pandemic,” American said in a message to employees. “Today’s actions help us shore up our longer-term liquidity until demand returns.”
US airlines slammed by the coronavirus pandemic have been building cash through equity sales and loans as passenger totals remain about 70% below year-ago levels. Carriers have also parked aircraft, cut flying schedules and asked thousands of employees to retire early or take leaves to further reduce spending.
American’s federal loan carries an interest rate of around 3.5 percentage points above the London Interbank Offered Rate.