ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

PSP3


On April 23, 2021 (the "PSP3 Closing Date"), American Airlines, Inc. ("AAI"),
Envoy Air Inc. ("Envoy"), Piedmont Airlines, Inc. ("Piedmont") and PSA Airlines,
Inc. (together with AAI, Envoy and Piedmont, the "Guarantor Subsidiaries"), each
a wholly-owned subsidiary of American Airlines Group Inc. (the "Company"),
entered into a Payroll Support Program 3 Agreement (the "PSP3 Agreement") with
the United States Department of Treasury (the "Treasury"), with respect to the
Payroll Support Program ("PSP3") established under Section 7301 of the American
Rescue Plan Act of 2021 (the "ARP"). In connection with its entry into the PSP3
Agreement, on the PSP3 Closing Date, the Company also entered into a warrant
agreement (the "PSP3 Warrant Agreement") with the Treasury, and the Company
issued a promissory note to the Treasury (the "PSP3 Promissory Note"), with the
Guarantor Subsidiaries as guarantors.
PSP3 Agreement
Pursuant to the PSP3 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 $3,310.9 million. The first Installment, in
the amount of approximately $1,655.4 million, was disbursed by the Treasury on
April 23, 2021.
In connection with PSP3, the Company is required to comply with the relevant
provisions of the ARP, including the requirement that funds provided pursuant to
the PSP3 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 at least
September 30, 2021, 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
dividends on the Common Stock through September 30, 2022, as well as those that
restrict the payment of certain executive compensation until April 1, 2023. The
PSP3 Agreement also imposes substantial reporting obligations on the Company and
the Guarantor Subsidiaries.
PSP3 Promissory Note
As partial compensation to the United States Government for the provision of
financial assistance under the PSP3 Agreement, the Company issued the PSP3
Promissory Note to the Treasury, which provides for the Company's unconditional
promise to pay to the Treasury the initial principal sum of approximately $466.6
million, subject to an increase equal to 30% of the amount of each additional
Installment disbursed under the PSP3 Agreement after the PSP3 Closing Date, and
the guarantee of the Company's obligations under the PSP3 Note by the Subsidiary
Guarantors. Assuming the total Installments to be paid pursuant to the PSP3
Agreement aggregate approximately $3,310.9 million, the PSP3 Promissory Note
will have a total principal amount of approximately $963.3 million.
The PSP3 Promissory Note bears interest on the outstanding principal amount at a
rate equal to 1.00% per annum until the fifth anniversary of the PSP3 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 PSP3 Closing Date (the "PSP3 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 September 30, 2021. The aggregate principal
amount outstanding under the PSP3 Promissory Note, together with all accrued and
unpaid interest thereon and all other amounts payable under the PSP3 Promissory
Note, will be due and payable on the PSP3 Maturity Date.
The Company may, at any time and from time to time, voluntarily prepay amounts
outstanding under the PSP3 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 PSP3 Promissory Note at such time, together with any
accrued interest or other amounts owing under the PSP3 Promissory Note at such
time.
The PSP3 Promissory Note is the Company's senior unsecured obligation and each
guarantee of the PSP3 Promissory Note is the senior unsecured obligation of each
of the Subsidiary Guarantors, respectively. The PSP3 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 PSP3 Promissory Note may, and in certain circumstances
will automatically, be accelerated and become due and payable immediately.

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The PSP3 Promissory Note is in substantially the same form as the promissory
note entered into in connection with PSP2 (as defined below) and the Payroll
Support Program ("PSP1") established under the Coronavirus Aid, Relief and
Economic Security Act.
PSP3 Warrant Agreement and PSP3 Warrants
As partial compensation to the United States Government for the provision of
financial assistance under the PSP3 Agreement, and pursuant to the PSP3 Warrant
Agreement, the Company has agreed to issue warrants (each, a "PSP3 Warrant" and,
collectively, the "PSP3 Warrants") to the Treasury to purchase shares (the "PSP3
Warrant Shares") of the Common Stock. The exercise price of the PSP3 Warrant
Shares is $21.75 per share (which was the closing price of the Common Stock on
The Nasdaq Global Select Market on March 10, 2021) (the "PSP3 Exercise Price"),
subject to certain anti-dilution provisions provided for in the PSP3 Warrant.
Pursuant to the PSP3 Warrant Agreement, (a) on the PSP3 Closing Date, the
Company issued to the Treasury a PSP3 Warrant to purchase up to an aggregate of
2,145,426 shares of Common Stock based on the terms described herein and (b) on
the date of each increase of the principal amount of the PSP3 Promissory Note in
connection with the disbursement of an additional Installment under the PSP3
Agreement, the Company will issue to the Treasury an additional PSP3 Warrant for
a number of shares of Common Stock equal to 10% of such increase of the
principal amount of the PSP3 Promissory Note, divided by the PSP3 Exercise
Price. Assuming the total Installments to be paid pursuant to the PSP3 Agreement
aggregate approximately $3,310.9 million, the total number of PSP3 Warrant
Shares issuable will be 4,428,783, subject to certain anti-dilution provisions
provided for in the PSP3 Warrants.
The PSP3 Warrants do not have any voting rights and are freely transferrable,
with registration rights. Each PSP3 Warrant expires on the fifth anniversary of
the date of issuance of such PSP3 Warrant. The PSP3 Warrants will be exercisable
either through net share settlement or in cash, at the Company's option.
The PSP3 Warrants issued under the PSP3 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
PSP3 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 PSP3 Warrants are being issued solely as compensation to the United States
Government related to entry into the PSP3 Agreement. No separate proceeds (apart
from the financial assistance Installments described above) are being received
upon issuance of the PSP3 Warrants or will be received upon exercise thereof.
The PSP3 Warrant Agreement and PSP3 Warrants are in substantially the same forms
as the warrant agreement and warrants entered into in connection with PSP1 and
PSP2.
PSP2
On January 15, 2021 (the "PSP2 Closing Date"), the Guarantor Subsidiaries
entered into a Payroll Support Program Extension Agreement (the "PSP2
Agreement") with 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. In connection with its entry into the
PSP2 Agreement, on the PSP2 Closing Date, the Company also entered into a
warrant agreement (the "PSP2 Warrant Agreement") with the Treasury, and the
Company issued a promissory note (the "PSP2 Promissory Note") to the Treasury,
with the Guarantor Subsidiaries as guarantors. These transactions are more fully
described in the Current Reports on Form 8-K filed by the Company and AAI on

January 19, 2021 (the "January 8-K") and March 17, 2021 . On April 23, 2021, the Guarantor Subsidiaries received a third installment of PSP2 financial assistance in the aggregate amount of $463.0 million and in connection therewith increased the amount of the PSP2 Promissory Note by $138.9 million and issued an additional warrant (a "PSP2 Warrant" and, together with the other warrants issued pursuant to the PSP2 Warrant Agreement, the "PSP2 Warrants") to purchase up to 886,998 shares of Common Stock. After taking into account this third installment, the Company has received, in aggregate, $3,549.8 million of PSP2 financial assistance, for which the Company has now provided Treasury with the PSP2 Promissory Note in an aggregate amount of $1,034.9 million and PSP2 Warrants to purchase, in aggregate, up to 6,608,749 shares of Common Stock at an exercise price of $15.66 per share, subject to certain anti-dilution provisions provided for in the PSP2 Warrant.

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. . .


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 caption "PSP3-PSP3 Promissory Note" 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 captions "PSP3-PSP3 Warrant Agreement and PSP3 Warrants" and "PSP2" 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 March 31, 2021 (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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