American Airlines Group Inc. (NASDAQ:AAL) is seeking to raise around $2 billion from the sales of shares and convertible bonds following an increase in the size of the offerings, according to sources familiar with the matter.

American Airlines announces equity and convertible bond offering

The carrier has alerted investors for a possible 5-years secured note which will not be repaid during the term of the bond with an 11% yield. Negotiations regarding the terms of the offerings, as well as the yield, are still preliminary and likely to change. As previously indicated, various assets like airport gates and slots might back the debt.

The airline had already increased its municipal bonds from $100 million that it had previously planned to offer to $360 million. The bond is priced at a 5.5% yield by 2031, which are almost 4.6% points more than the AAA-rated municipal bonds, and it has received around $4 billion of investor orders. Similarly, the company will sell $1 billion worth of shares priced at $13.50 per share.

Also, the company increased its convertible note portion to around $1 billion with the notes set at a 6.5% coupon and a conversion premium of 20%. Previously the company had plans of raising $1.5 billion through the offering with a 50:50 split of convertible bonds and equity sales.

Airlines tap debt investors to raise cash

American Airlines is among the most debt-burdened US airlines, and the consideration for financing is expected to help the airline weather the decline in travel demand as a result of the COVID-19 pandemic. In recent Weeks other airlines such as Southwest Airlines Co (NYSE:LUV), Delta Air Lines Inc. (NYSE:DAL), and JetBlue Airways Corp (NASDAQ:JBLU) have also tapped debt investors as they seek to boost their liquidity.

So far, the company has received federal payroll support of $5.8 billion and a $1 billion 364-day term loan from financial institutions. The offer’s move comes as the company plans to tap the frequent-flyer program to raise around $5 billion in debt markets.

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