American Airlines, Inc. and American Airlines Group Inc., American’s parent corporation (AAG), entered into a Credit and Guaranty Agreement, dated as of the Closing Date, among American, as the borrower, AAG, as parent and guarantor, the lenders party thereto, Citibank N.A., as administrative agent and collateral agent, Citibank N.A., as left lead arranger and bookrunner, Bank of America, N.A., Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A., as joint lead arrangers and bookrunners, Citibank N.A., Bank of America, N.A., Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A., as syndication agents, and Citibank N.A., Bank of America, N.A., Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A., as documentation agents. The Credit Agreement provides for a 364-day $1.0 billion senior secured delayed draw term loan credit facility (the “Facility”). Term loans under the Facility will be due and payable in a single installment on the maturity date on March 17, 2021.
As of March 18, 2020, no borrowings were outstanding under the Facility and, accordingly, $1.0 billion of borrowing capacity remains available under the Facility. The proceeds from the Facility will be used for general corporate purposes.
Voluntary prepayments at par of term loans under the Facility may be made by American at any time. Mandatory prepayments at par of term loans under the Facility are required to the extent necessary to comply with American’s covenants regarding the collateral coverage ratio and certain dispositions of the Collateral (as defined herein). In addition, if a “change of control” (as defined in the Credit Agreement) occurs with respect to AAG, American will be required to repay at par the term loans outstanding under the Facility.
Borrowings of term loans under the Facility will bear interest at an index rate plus an applicable index margin or, at American’s option, the London interbank offer rate (“LIBOR”) (subject to a floor of 1.00%) plus an applicable LIBOR margin for interest periods of one, three or six months (or, if available to all affected lenders, 12 months or a shorter period). For term loans under the Facility based on an index rate, the applicable margin will be 1.00% for such term loans made up to 180 days after the Closing Date and will increase to 1.75% thereafter. For term loans under the Facility based on LIBOR, the applicable margin will be 2.00% for such term loans made up to 180 days after the Closing Date and will increase to 2.75% thereafter.
The obligations of American under the Credit Agreement are secured by liens on certain slots, foreign gate leaseholds and route authorities (collectively, “SGR”) utilized by American in providing its scheduled air carrier services to and from Mexico and Central America and to London and certain cities in the European Union (collectively, the “Collateral”). The lien on Mexico and Central America SGR is a first-priority lien (the “First Lien”) and the lien on London and European SGR is a second-priority lien (the “Second Lien”). American is permitted under the Credit 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 Credit Agreement requires American, under certain circumstances, to appraise the value of the Collateral and calculate the collateral coverage ratio. If the calculated collateral coverage ratio is below 2.0 to 1.0 with respect to Collateral secured pursuant to the First Lien or 1.33 to 1.00 with respect to Collateral secured pursuant to the Second Lien, American may be required either to provide additional Collateral (which may include cash collateral) to secure its obligations under the Credit Agreement or repay the term loans under the Facility or certain other indebtedness, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional Collateral or repayment, is at least 2.0 to 1.0 with respect to Collateral secured pursuant to the First Lien and 1.33 to 1.0 with respect to Collateral secured pursuant to the Second Lien.
The Credit Agreement also includes affirmative, negative and financial covenants that, among other things, limit the ability of AAG and its restricted subsidiaries to pay dividends and 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 Credit Agreement, AAG must maintain a minimum aggregate liquidity of $2.0 billion.
The Credit Agreement contains events of default customary for similar financings, including cross-default to other material indebtedness. Upon the occurrence of an event of default, the outstanding obligations under the Credit Agreement may be accelerated and become due and payable immediately.
American and AAG have a number of other commercial relationships with the lenders and other parties to the Credit Agreement. From time to time, certain of such lenders and parties or their affiliates perform investment banking and advisory services for, and furnish general financing and banking services to, American, AAG and their affiliates.