American Airlines could return to debt market to repay US pandemic relief loans

American Airlines Group Inc. is planning a return to the debt market as early as March to help repay U.S. government loans that have helped keep the business afloat during the pandemic.

Goldman Sachs Group Inc., which last year helped United Airlines Holdings Inc. use its loyalty program to support new debt, is surveying potential credit investors in a debt deal for American, according to reports. people familiar with the matter.

The Fort Worth-based American, who backed a $ 7.5 billion US Treasury loan with his loyalty program, plans to do the same with his new debt, said the people, who asked not to be named because the matter is private. Terms are still fluid and could change, they said.

American was among the first wave of carriers to secure billions of dollars in Cares Act loans from $ 2 trillion for economic relief from the pandemic. Goldman is in talks with investors for a $ 7 billion to $ 9 billion refinancing in the coming months for the airline, the sources said. Discussions focused on the potential for a 6-7% return.

Representatives for American and Goldman Sachs declined to comment.

The airline, which has borrowed from both the government’s wage support program and a carrier bailout program, is still deciding which of its public debt will be repaid upon refinancing. some people said.

As central banks continue to bootstrap the economy with low interest rates, demand for higher yielding debt has skyrocketed and low-rated companies have flocked to the bond and loan markets. to borrow. According to data from the Bloomberg Barclays Index, borrowing costs for speculative-grade issuers fell below 4% this week for the first time.

American received another boost recently after its stock was swept away by a rally among heavily shorted stocks targeted by an army of traders on Reddit’s Wall Street Bets forum – jumping 31% in a trading session last month. Amid the trading frenzy, the airline announced plans to sell up to $ 1.1 billion in stock.

American’s AAdvantage loyalty program is estimated to be worth $ 18 billion to $ 30 billion, American said in May, during negotiations with the Treasury Department to use at least some of the assets as collateral for loans.

Katia Porzecanski, Katherine Doherty, Gowri Gurumurthy and Mary Schlangenstein, Bloomberg

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