Breakingviews – Capital Calls: The American Swaps His Debt For Freedom
NEW YORK (Reuters Breakingviews) – Concise insights into global finance in the age of Covid-19.
DOWNGRADE. American Airlines wants to shake its Covid-19 legacy. The Texas-based airline is selling $ 5 billion in tickets and raising another $ 2.5 billion by expanding its rewards program to pay for funds it received from the US Treasury Department. Cheap government-backed liquidity forced the company to issue warrants and placed restrictions on share buybacks and executive compensation.
Shortly after agreeing to the bailout, the US action seemed almost worthless, according to calculations by Breakingviews. Since then, the stock has more than tripled, valuing the carrier at $ 13 billion. Shares are only 30% lower than when the pandemic hit.
The current deal would remove restrictions imposed by the Treasury, serving as a short-term boost for stocks, which gained 6%. The problem is, the pandemic is not in the rearview mirror of Americans. The company continued to burn $ 30 million per day in the fourth quarter. One or two jolts or two with vaccines and bargain taxpayer dollars could become attractive again. (By Lauren Silva Laughlin)
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