Shares in American Airlines Group Inc. dropped 5.8% in premarket trading as the company announced its new financing strategy to raise $3.5 billion. The company needs this funding to handle the losses that came after the travel bans imposed during the coronavirus pandemic.
The airline shared its plans to raise $1.5 billion by selling shares and convertible senior notes. A portion of the net profits from the offerings will be used to improve the company’s liquidity and for general corporate purposes.
The $1.5 billion offering consists of a 30-day period during which underwriters have the option to buy up to $112.5 million of additional common shares and up to $112.5 million of additional notes. The airline announced that this offering will be due to 2025. The underwriters will be BofA Securities, Citigroup, Goldman Sachs and JP Morgan.
American Airlines also intends to raise an additional $1.5 billion by selling senior secured notes. Another point of the airline company’s strategy is to apply for a $500 million loan facility in 2024.
Last week, American Airlines and Delta Air Lines said that their companies are experiencing a slow recovery after the demand started increasing as travel bands began to be lifted. This helped the airlines to cut daily cash burns in June, following the record decline in passengers in April.
The American Airlines stock has already lost 44% of its value for the year due to the strict travel bands that were imposed worldwide. During the first quarter of the year, US airline companies sustained huge cash losses and were forced to implement broad plans for cutting down costs. As coronavirus cases increase in the US, there are fears for a second pandemic wave that could put the recovery process on pause.
Analyst stock price forecast and recommendation
According to CNN Money, 15 analysts offering 12-month price forecasts for American Airlines Group Inc. have a median target of $14.00, with a high estimate of $27.00 and a low estimate of $1.00. The median estimate represents a -12.47% decrease from the last price of $16.00.
The same media also offers the recommendations of 19 investment analysts who gave the American Airlines Group Inc. stock a consensus rating of “Sell”. Among the 19 polled analysts, 8 ranked the stock as “Sell”, 7 as “Hold”, 3 as “Buy” and 1 – as “Outperform”.