American Airlines Group Inc. (NASDAQ: AAL), has received a summary term sheet from the U.S. Department of the Treasury for the grant program (the “Payroll Support Program”) and the secured loan program, each in connection with implementation of the CARES Act.
AAL has indicated to Treasury that it has accepted the terms of the grant and intends to apply for a secured loan.
Treasury is to provide to the Company a grant in an amount expected to be approximately $5,810 million. In consideration for the grant, AAL would issue to Treasury a low-interest rate, PSP loan in the principal amount of approximately $1,713 million, which obligation will mature 10 years after issuance. The PSP Term loan will be prepayable at any time at par. Also in consideration for the grant, the Company would issue to PSP warrants to purchase approximately 13.7 million shares of common stock of the Company at a price of $12.51 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on April 9, 2020). The PSP Warrants will expire five years after issuance, and will be exercisable either through net share settlement or cash, at the Company’s option.
In connection with the Payroll Support Program, AAL will be required to comply with the relevant provisions of the CARES Act, including the requirement that the grant will exclusively be used for the continuation of payment of employee wages, salaries and benefits, and the provisions prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation until March 24, 2022.
Will the airlines take this money and then layoff their staff down the road?