Originally Posted by
Texasbound
American Air Sees $45 Billion of Demand on $10 Billion Debt Sale (msn.com)
That is a lot of demand.
Let’s see, $10 BILLION at 5.75% interest is $575 million in annual debt service. Interest expense last year was a $1.277 BILLION dollar item and that only reflected about half of the annual cost of the major borrowing done in June. So with a full year’s expensing of that borrowing (with an effective 12% coupon) plus this borrowing AA is looking at an ANNUAL interest expense of roughly $2 BILLION.
To put this in perspective, net income for the two years preCOVID averaged about $1.55 Billion a year. That’s twice the interest expense prior to COVID.
That is a lot of interest.
https://americanairlines.gcs-web.com...e28c18f351_103
Moreover, certain of our financing arrangements contain significant minimum cash balance or similar liquidity requirements. As a result, we cannot use all of our available cash to fund operations, capital expenditures and cash obligations without violating these requirements. See Note 5 to AAG’s Consolidated Financial Statements in Part II, Item 8A and Note 3 to American’s Consolidated Financial Statements in Part II, Item 8B for information regarding our financing arrangements.
In the past, we have from time to time refinanced, redeemed or repurchased our debt and taken other steps to reduce or otherwise manage the aggregate amount and cost of our debt, lease and other obligations or otherwise improve our balance sheet. Going forward, depending on market conditions, our cash position and other considerations, we may continue to take such actions.