Things in the Sky

American, which had some big liquidity moves last week, announced yesterday that it would be making further moves to boost its cash balance by issuing notes $250 million of notes due in 2014 along with 30 million shares of common stock. The offerings have over-allotment options of $37.5 million and 4.5 million shares, respectively.

(Photo courtesy of oneworld)

Shares of American’s parent, AMR, have taken a  hit in after-hours trading, and are currently down about 4%. Perhaps the street is concerned about the dilution caused by the new offering. The new shares could increase the number of shares outstanding by 10.7%, or up to 12.5% if the entire over-allotment option is utilized.

The combined offerings have the potential go give American an over $500 million in liquidity. I’m interested in seeing how the offering of notes goes – when United offered notes, for example, they had to offer them at a discount resulting in a 17% yield.

American will be using the proceeds of these offerings for the always-revealing “general corporate purposes,” though their was in interesting note in both SEC filings:

We are in discussions with The Japan Airlines Group (“JAL”), a member of the oneworld alliance, about ways to broaden and deepen our relationship. We are discussing various options, including a joint business relationship with JAL and possible capital or financing arrangements. We cannot give any prediction as to the timing or outcome of these discussions.

Could the proceeds be used to aid in a partial purpose of JAL? That’s very possible, but either way, building up cash is a good thing.

Speaking of JAL, one new idea going around is the possibility of splitting up the carrier into two parts, one with profitable operations, and one with all of the..er…crap.