MIAMI – American Airlines (AA) said yesterday it has plans to secure US$3.5bn in liquidity while Virgin Australia (VA) plans a debt-to-equity swap as both airlines battle with travel restrictions and lack of demand due to the ongoing pandemic.

On its part, AA plans to raise US$1.5bn from selling convertible senior notes and shares, another US$1.5bn in senior secured notes, due 2025, and US$500m from a term loan facility due 2024.

Photo Credit Luca Flores

American Airlines stock options and convertible notes

The stock and convertible notes will include a 30-day option for underwriters to purchase up to US$112.5m of additional shares, and up to the same amount of convertible notes, the airline says.

Representatives for the underwriters will be Goldman Sachs, Citigroup, BofA Securities, and JP Morgan.

In the U.S., both Delta Air Lines (DL) and AA are seeing a slow recovery in demand that will decrease their cash burn rates after suffering record low passenger numbers in April,.

Virgin Australia’s sale and backup plan

Virgin Australia (VA) bondholders are working on a plan to save the airline which could involve a debt-to-equity swap if the airline isn’t satisfied with a sale offer, with bids made from finalists Bain Capital and Cyrus Capital Partners today.

The airline, Australia’s second-biggest, entered voluntary administration in April and owes almost A$7bn to creditors and A$2bn to 6,500 unsecured bondholders.

If no offers are acceptable, bondholders are preparing a backup plan, which could make bidders, and administrator Deloitte, more open to the interests of the airline in terms of a deal.

Deloitte hopes to sign a deal with the winning bidder by June 30.