| ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. |
Amendment to Treasury Loan Agreement
On October 21, 2020 (the “Amendment Date”), American Airlines, Inc. (“American”) and American Airlines Group Inc., American’s parent corporation (“AAG” and, together with American, the “Companies”), entered into a Restatement Agreement, dated as of the Amendment Date (the “Restatement Agreement”), to the Loan and Guarantee Agreement, dated as of September 25, 2020 (the “Original Loan Agreement” and as amended and restated by the Restatement Agreement, the “Loan Agreement”), among American, as the borrower, AAG, as guarantor, the other guarantors party thereto from time to time, the United States Department of the Treasury (the “Treasury”), as lender, and the Bank of New York Mellon, as administrative agent and collateral agent. The Loan Agreement provides for a secured term loan facility (the “Facility”), which permits American to borrow up to $7,500 million, representing an increase of $2,023 million beyond the $5,477 million of commitment under the Facility as of the date of execution of the Original Loan Agreement. On September 25, 2020, American borrowed $550 million, which currently accrues interest at the rate of 3.73% through September 15, 2021, at which time the interest rate will reset according to the formula set forth in the Loan Agreement. No additional borrowing was made by American on the Amendment Date in connection with the entry into the Restatement Agreement.
In connection with its entry into the Original Loan Agreement, AAG entered into a warrant agreement (the “Warrant Agreement”) with Treasury pursuant to which AAG agreed to issue warrants (each a “Warrant” and, collectively, the “Warrants”) to Treasury to purchase up to an aggregate of 43,780,975 shares (the “Warrant Shares”) of AAG’s common stock, par value $0.01 per share, based on a commitment of $5,477 million under the Facility as of the date of execution of the Original Loan Agreement. Upon entry into the Restatement Agreement, Warrants to purchase up to 59,952,038 Warrant Shares became issuable by AAG to Treasury pursuant to the Warrant Agreement based on the increased commitment of $7,500 million under the Facility as of the Amendment Date. Of such Warrants to purchase 59,952,038 Warrant Shares, AAG issued a Warrant to purchase 4,396,483 Warrant Shares on September 25, 2020 in connection with the borrowing of $550 million described above. On the date of each additional borrowing under the Loan Agreement, AAG will issue to Treasury an additional Warrant proportionate with the amount borrowed (i.e, an additional Warrant for a number of shares of AAG’s common stock equal to (a) 10% of such borrowing, divided by (b) the exercise price of $12.51 per Warrant Share).
The other material terms of the Loan Agreement and the Warrant Agreement, including the terms of the issuance of the Warrants, remain effective as described in Current Report on
Form 8-K of American and AAG filed on September 25, 2020.
On October 22, 2020, AAG entered into an equity distribution agreement (the “Distribution Agreement”) with Goldman Sachs & Co. LLC, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC and BNP Paribas Securities Corp. (collectively, the “Managers”), relating to the issuance and sale from time to time by AAG (the “ATM Offering”), through the Managers, of shares of AAG’s common stock having an aggregate gross sales price of up to $1,000,000,000 (the “ATM Shares”). Sales of the ATM Shares, if any, under the Distribution Agreement may be made in ordinary brokers’ transactions, to or through a market maker, on or through The Nasdaq Global Select Market, the existing trading market for AAG’s common stock, or any other market venue where AAG’s common stock may be traded, in the
market, in privately negotiated transactions, or through a combination of any such methods of sale. The Managers may also sell AAG’s common stock by any other method permitted by law.
Under the terms of the Distribution Agreement, AAG may also sell ATM Shares to any Manager, as principal for its own account, including a block trade, at a price agreed upon at the time of sale. If AAG sells ATM Shares to a Manager as principal, AAG will enter into a separate terms agreement with such Manager and will describe any such agreement in a separate prospectus supplement or pricing supplement.
The Distribution Agreement includes customary representations, warranties and covenants by AAG and customary obligations of the parties and termination provisions. AAG has agreed to indemnify the Managers against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), or to contribute to payments the Managers may be required to make with respect to any of those liabilities. Under the terms of the Distribution Agreement, AAG will pay the Managers a commission of up to 1.0% of the gross sales price of any ATM Shares sold.
The ATM Shares to be sold under the Distribution Agreement, if any, will be issued and sold pursuant to the prospectus forming a part of AAG’s shelf registration statement on Form
S-3
(File
No. 333-236503),
which became effective upon filing by AAG with the Securities and Exchange Commission on February 19, 2020, and a prospectus supplement dated October 22, 2020 related thereto. AAG plans to use the net proceeds from any sales of ATM Shares pursuant to the Distribution Agreement for general corporate purposes and to enhance its liquidity position.
The offering of common stock pursuant to the Distribution Agreement will terminate upon the earliest of (1) the sale of all ATM Shares subject to the Distribution Agreement, (2) the termination of the Distribution Agreement by AAG or by any of the Managers, with respect to such Manager only or (3) February 19, 2023.
The foregoing description of the Distribution Agreement is not complete and is qualified in its entirety by reference to the full text of the Distribution Agreement, a copy of which is filed as Exhibit 1.1 to this Current Report on
Form 8-K
and is incorporated in this Item 1.01 by reference.
The Managers and their related entities have engaged, and may in the future engage, in commercial and investment banking transactions with AAG in the ordinary course of their business. They have received, and expect to receive, customary compensation and expense reimbursement for these commercial and investment banking transactions.
