ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.




Payroll Support Program Extension
On January 15, 2021 (the "Closing Date"), American Airlines, Inc. ("AAI"), Envoy
Air Inc. ("Envoy"), Piedmont Airlines, Inc. ("Piedmont") and PSA Airlines, Inc.
("PSA" and together with AAI, Envoy and Piedmont, the "Subsidiaries"), each a
wholly-owned subsidiary of American Airlines Group Inc. (the "Company"), entered
into a Payroll Support Program Extension Agreement (the "PSP2 Agreement") with
the United States Department of Treasury (the "Treasury"), with respect to the
Payroll Support Program ("PSP2") established under Subtitle A of Title IV of
Division N of the Consolidated Appropriations Act, 2021 (the "PSP Extension
Law"). In connection with its entry into the PSP2 Agreement, on the Closing
Date, the Company also entered into a Warrant Agreement (the "Warrant
Agreement") with the Treasury, and the Company issued a promissory note to the
Treasury (the "Promissory Note"), with the Subsidiaries as guarantors (the "Note
Guarantors").
PSP2 Agreement
Pursuant to the PSP2 Agreement, the Treasury is to provide to the Company
financial assistance to be paid in installments (each, an "Installment")
expected to total in the aggregate at least $3,086.8 million. The first
Installment, in the amount of approximately $1,543.3 million, was disbursed by
the Treasury on January 15, 2021.
In connection with PSP2, the Company is required to comply with the relevant
provisions of the PSP Extension Law, including the requirement that funds
provided pursuant to the PSP2 Agreement be used exclusively for the continuation
of payment of employee wages, salaries and benefits, the requirement against
involuntary furloughs and reductions in employee pay rates and benefits through
March 31, 2021, the requirement to recall employees involuntarily terminated or
furloughed after September 30, 2020, the provisions that prohibit the repurchase
of the Company's common stock, $0.01 par value per share (the "Common Stock"),
and the payment of common stock dividends through March 31, 2022, as well as
those that restrict the payment of certain executive compensation until October
1, 2022. The PSP2 Agreement also imposes substantial reporting obligations on
the Company and the Subsidiaries.
Promissory Note
As compensation to the United States Government for the provision of financial
assistance under the PSP2 Agreement, the Company issued the Promissory Note to
the Treasury, which provides for the Company's unconditional promise to pay to
the Treasury the initial principal sum of approximately $433.0 million, subject
to an increase equal to 30% of the amount of each additional Installment
disbursed under the PSP2 Agreement after the Closing Date, and the guarantee of
the Company's obligations by the Note Guarantors. Assuming the total
Installments to be paid pursuant to the PSP2 Agreement aggregate approximately
$3,086.8 million, the Promissory Note will have a total principal sum of
approximately $896.0 million.
The Promissory Note bears interest on the outstanding principal amount at a rate
equal to 1.00% per annum until the fifth anniversary of the Closing Date and
2.00% plus an interest rate based on the secured overnight financing rate per
annum or other benchmark replacement rate consistent with customary market
conventions (but not to be less than 0.00%) thereafter until the tenth
anniversary of the Closing Date (the "Maturity Date"), and interest accrued
thereon will be payable in arrears on the last business day of March and
September of each year, beginning on March 31, 2021. The aggregate principal
amount outstanding under the Promissory Note, together with all accrued and
unpaid interest thereon and all other amounts payable under the Promissory Note,
will be due and payable on the Maturity Date.
The Company may, at any time and from time to time, voluntarily prepay amounts
outstanding under the Promissory Note, in whole or in part, without penalty or
premium. Within 30 days of the occurrence of certain change of control
triggering events, the Company is required to prepay the aggregate outstanding
principal amount of the Promissory Note at such time, together with any accrued
interest or other amounts owing under the Promissory Note at such time.
The Promissory Note is the Company's senior unsecured obligation and each
guarantee of the Promissory Note is the senior unsecured obligation of each of
the Note Guarantors, respectively. The Promissory Note 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 Promissory Note may, and in certain circumstances will automatically, be
accelerated and become due and payable immediately.

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The Promissory Note is in substantially the same form as the promissory note
entered into in connection with the Payroll Support Program ("PSP1") established
under the Coronavirus Aid, Relief and Economic Security Act.
Warrant Agreement and Warrants
As compensation to the United States Government for the provision of financial
assistance under the PSP2 Agreement, and pursuant to the Warrant Agreement, the
Company has agreed to issue warrants (each a "Warrant" and, collectively, the
"Warrants") to the Treasury to purchase shares (the "Warrant Shares") of the
Common Stock. The exercise price of the Warrant Shares is $15.66 per share
(which was the closing price of the Common Stock on The Nasdaq Global Select
Market on December 24, 2020) (the "Exercise Price"), subject to certain
anti-dilution provisions provided for in the PSP Warrant.
Pursuant to the Warrant Agreement, (a) on the Closing Date, the Company issued
to the Treasury a Warrant to purchase up to an aggregate of approximately
2,765,090 shares of Common Stock based on the terms described herein and (b) on
the date of each increase of the principal amount of the Promissory Note in
connection with the disbursement of an additional Installment under the PSP2
Agreement, the Company will issue to the Treasury an additional Warrant for a
number of shares of Common Stock equal to 10% of such increase of the principal
amount of the Promissory Note, divided by the Exercise Price. Assuming the total
Installments to be paid pursuant to the PSP2 Agreement aggregate approximately
$3,086.8 million, the total number of Warrant Shares issuable is 5,721,750,
subject to certain anti-dilution provisions, including, among others, for below
market issuances and payment of dividends, provided for in the Warrants.
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 the Company's option.
The Warrants issued under the Warrant Agreement are issued pursuant to an
exemption from registration provided for under Section 4(a)(2) of the Securities
Act of 1933, as amended (the "Securities Act") as transactions not involving a
public offering. Any issuance of Common Stock upon exercise of the Warrants will
be exempt as an exchange by the Company exclusively with its security holders
eligible for exemption under Section 3(a)(9) of the Securities Act.
The Warrants are being issued solely as compensation to the United States
Government related to entry into the PSP2 Agreement. No separate proceeds (apart
from the financial assistance Installments described above) are being received
upon issuance of the Warrants or will be received upon exercise thereof.
The Warrant Agreement and Warrants are in substantially the same forms as the
warrant agreement and warrants entered into in connection with PSP1.
Treasury Loan Agreement Borrowing Extension
As previously disclosed, on September 25, 2020, the Company and AAI entered into
a Loan and Guarantee Agreement (the "Treasury Loan Agreement") with the
Treasury, which provided for a secured term loan facility (the "Treasury Term
Loan Facility") that permitted AAI to borrow up to $5.5 billion. On September
25, 2020, AAI borrowed an initial amount of $550 million. Subsequently, on
October 21, 2020, the Company and AAI entered into an amendment to the Treasury
Loan Agreement, which increased the borrowing amount to up to $7.5 billion.
On January 15, 2021, the Company and AAI entered into a letter agreement further
amending the Treasury Loan Agreement providing for an extension of the deadline
pursuant to which AAI may, at its option, borrow additional amounts in up to two
subsequent borrowings, from March 26, 2021 to May 28, 2021.
The other terms of the Treasury Loan Agreement were not affected.


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 "Promissory Note" and "Treasury Loan Agreement Borrowing Extension" are incorporated herein by reference to the extent responsive to Item 2.03.

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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 (the "Exchange Act"), 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 the Company'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 the Company'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 the Company's Quarterly Report on Form 10-Q for the quarter ended September 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 the Company's other filings with the Securities and Exchange Commission. There may be other factors of which the Company 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 COVID-19 outbreak to economic conditions and the travel industry in general and the financial position and operating results of the Company in particular have been material, are changing rapidly, and cannot be predicted. The Company 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. Forward looking statements speak only as of the date hereof or as of the dates indicated in the statement.

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