ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.




Treasury Loan Agreement
On September 25, 2020 (the "Closing Date"), American Airlines, Inc. ("American")
and American Airlines Group Inc., American's parent corporation ("AAG"), entered
into a Loan and Guarantee Agreement, dated as of the Closing Date (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, as executed on
the Closing Date, provides for a secured term loan facility (the "Facility")
which permits American to borrow up to $5,477 million as further described
below. American has been advised by the Treasury that it intends to allocate
additional loans under the Coronavirus Aid, Relief, and Economic Security Act
(the "CARES Act") in October 2020 and that such additional allocations are
currently expected to cause the amount available to American under the Facility
to increase to up to $7,500 million in the aggregate, although such amount is
subject to final approval by the Treasury. Any such increase will require a
written amendment to the Loan Agreement executed by all of the parties thereto.
On the Closing Date, American borrowed $550 million and may, at its option,
borrow additional amounts in up to two subsequent borrowings until March 26,
2021. The proceeds from the Facility will be used for certain general corporate
purposes and operating expenses in accordance with the terms and conditions of
the Loan Agreement and the applicable provisions of the CARES Act.
Borrowings under the Facility will bear interest at a variable rate per annum
equal to (a)(i) the London interbank offer rate divided by (ii) one (1) minus
the Eurodollar Reserve Percentage (as defined in the Loan Agreement) plus (b)
3.50%. Accrued interest on the loans shall be payable in arrears on the first
business day following the 14
th
day of each March, June, September and December (beginning with September 15,
2021), and on the Maturity Date (as defined below). The applicable interest rate
for the $550 million loan drawn on the Closing Date under the Facility will be
3.87% per annum for the period from the Closing Date through September 15, 2021
at which time the interest rate will reset in accordance with the foregoing
formula.
All advances under the Facility will be in the form of term loans, all of which
will mature and be due and payable in a single installment on June 30, 2025 (the
"Maturity Date"). Voluntary prepayments of loans under the Facility may be made,
in whole or in part, by American, without premium or penalty, at any time and
from time to time. Amounts prepaid may not be reborrowed. Mandatory prepayments
of loans under the Facility are required, without premium or penalty, to the
extent necessary to comply with American's covenants regarding the expiry of
certain agreements constituting Collateral (as defined below), the debt service
coverage ratio, certain dispositions of the Collateral, certain debt issuances
secured by liens on the Collateral and certain indemnity, termination,
liquidated damages or insurance payments related to the Collateral. In addition,
if a "change of control" (as defined in the Loan Agreement) occurs with respect
to AAG, American will be required to repay the loans outstanding under the
Facility.
On the Closing Date, the obligations of American under the Loan Agreement are
secured by a first priority security interest on American's rights under U.S.
co-branded
credit card agreements and certain other loyalty program partner participation
agreements (including rights to receive cash flows thereunder), documents,
deposit accounts, securities accounts, books and records and intellectual
property related to American's AAdvantage
®
frequent flyer program (the "Loyalty Program") and all proceeds, accessions,
rents or profits related to the foregoing (collectively, the "Collateral").
American is permitted under the Loan Agreement to add certain types of assets to
the Collateral and, subject to certain conditions, release Collateral, in each
case from time to time at its discretion.
The Loan Agreement requires American, under certain circumstances, including
within ten (10) business days prior to the last business day of March and
September of each year, beginning March 2021, to appraise the value of the
Collateral and recalculate the collateral coverage ratio. If the calculated
collateral coverage ratio is less than 1.6 to 1.0, American will be required
either to provide additional Collateral (which may include cash collateral) to
secure its obligations under the Loan Agreement or repay the term loans under
the Facility, in such amounts that the recalculated collateral coverage ratio,
after giving effect to any such additional Collateral or repayment, is at least
--------------------------------------------------------------------------------
1.6 to 1.0. Based on the appraisal submitted by American in connection with the
execution of the Loan Agreement, the appraised value of the Collateral is
presently significantly in excess of the 2.0 to 1.0 collateral coverage ratio
necessary to access the amount under the Facility, including any contemplated
increase.
The Loan Agreement also requires American to calculate the debt service coverage
ratio on a quarterly basis. If the calculated debt service coverage ratio is
less than 1.75 to 1.00, then AAG and its subsidiaries will be required to place
an amount equal to at least 50% of certain revenues received from the Loyalty
Program (the "Loyalty Program Revenues") into a blocked account to be held for
the benefit of the lenders who may choose to use such funds to prepay the
outstanding term loans until the debt service coverage ratio is recalculated to
be greater than or equal to 1.75 to 1.00. If the calculated debt service
coverage ratio is less than or equal to 1.50 to 1.00, but greater than 1.25 to
1.00, then all amounts previously deposited into the blocked account will be
used to prepay outstanding term loans and an amount equal to at least 50% of all
future Loyalty Program Revenues will be transferred into the payment account and
used to prepay outstanding term loans until the debt service coverage ratio is
recalculated to be greater than 1.50 to 1.00. If the calculated debt service
coverage ratio is less than or equal to 1.25 to 1.00, then all amounts
previously deposited into the blocked account will be used to prepay outstanding
term loans and an amount equal to at least 75% of all future Loyalty Program
Revenues will be transferred into the payment account and used to prepay
outstanding term loans until the debt service coverage ratio is recalculated to
be greater than 1.25 to 1.00.
The Loan Agreement also includes affirmative, negative and financial covenants
that, among other things, limit the ability of AAG and its restricted
subsidiaries to pay dividends, repurchase common stock of AAG or make certain
other payments, make certain investments, incur liens on the Collateral, dispose
of the Collateral, enter into certain affiliate transactions and engage in
certain business activities, in each case subject to certain exceptions. In
addition, under the Loan Agreement, AAG must maintain a minimum aggregate
liquidity of $2.0 billion.
The Loan Agreement requires AAG to comply with the relevant provisions of the
CARES Act, including, but not limited to, the provisions that prohibit the
repurchase of AAG's common stock, the payment of common stock dividends,
continuation of certain scheduled air transportation service and those that
restrict the payment of certain executive compensation, in each case, through
the date that is 12 months after the date on which all amounts of loan
outstanding under the Facility have been repaid in full.
The Loan Agreement contains events of default, including cross-default with
respect to acceleration or failure to pay at maturity other material
indebtedness. Upon the occurrence of an event of default and subject to certain
grace periods, the outstanding obligations under the Loan Agreement may be
accelerated and become due and payable immediately.
Treasury Warrant Agreement and Warrants
In connection with its entry into the Loan Agreement, AAG also entered into a
warrant agreement (the "Warrant Agreement"), with Treasury. Pursuant to the
Warrant Agreement, AAG has 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 based on the
current $5,477 million commitment amount under the Facility. The exercise price
of the Warrant Shares will be $12.51 per share (the "Exercise Price"). The
exercise price and the number of Warrant Shares to be issued are subject to
adjustment as a result of certain anti-dilution provisions provided for in the
Warrants.
Pursuant to the Warrant Agreement, (a) on the Closing Date, AAG issued to
Treasury a Warrant to purchase up to 4,396,483 Warrant Shares and (b) on the
date of each borrowing under the Loan Agreement, AAG will issue to Treasury an
additional Warrant for a number of shares of AAG's common stock equal to 10% of
such borrowing, divided by the Exercise Price.
The Warrants do not have any voting rights and are freely transferrable, with
registration rights. Each Warrant expires on the fifth anniversary of the date
of issuance of such Warrant. The Warrants will be exercisable either through net
share settlement or cash, at AAG's option.
--------------------------------------------------------------------------------
The Warrants issued under the Warrant Agreement are issued pursuant to an
. . .

ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN


           OFF-BALANCE
           SHEET ARRANGEMENT OF A REGISTRANT.

The information provided in Item 1.01 under the captions "Treasury Loan Agreement" and "Private Notes Offering" is incorporated herein by reference to the extent responsive to Item 2.03.

ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.


The information provided in Item 1.01 under the caption, "Warrant Agreement and
Warrants" is incorporated herein by reference to the extent responsive to Item
3.02.
Cautionary Statement Regarding Forward-Looking Statements
Certain of the statements contained in this report should be considered
forward-looking statements within the meaning of the Securities Act, the
Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may be
identified by words such as "may," "will," "expect," "intend," "anticipate,"
"believe," "estimate," "plan," "project," "could," "should," "would,"
"continue," "seek," "target," "guidance," "outlook," "if current trends
continue," "optimistic," "forecast" and other similar words. Such statements
include, but are not limited to, statements about AAG's plans, objectives,
--------------------------------------------------------------------------------
expectations, intentions, estimates and strategies for the future, and other
statements that are not historical facts. These forward-looking statements are
based on AAG's current objectives, beliefs and expectations, and they are
subject to significant risks and uncertainties that may cause actual results and
financial position and timing of certain events to differ materially from the
information in the forward-looking statements. These risks and uncertainties
include, but are not limited to, those set forth in AAG's Quarterly Report on
Form
10-Q
for the six months ended June 30, 2020 (especially in Part I, Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Part II, Item 1A. Risk Factors), and other risks and
uncertainties listed from time to time in AAG's other filings with the
Securities and Exchange Commission. There may be other factors of which AAG is
not currently aware that may affect matters discussed in the forward-looking
statements and may also cause actual results to differ materially from those
discussed. In particular, the consequences of the coronavirus outbreak to
economic conditions and the travel industry in general and the financial
position and operating results of AAG in particular have been material, are
changing rapidly, and cannot be predicted. AAG does not assume any obligation to
publicly update or supplement any forward-looking statement to reflect actual
results, changes in assumptions or changes in other factors affecting these
forward-looking statements other than as required by law. Any forward-looking
statements speak only as of the date hereof or as of the dates indicated in the
statement.
--------------------------------------------------------------------------------

© Edgar Online, source Glimpses