American Airlines has finalised the details of its aid package from the US Treasury for the payroll financial assistance program as part of the Coronavirus Aid, Relief and Economic Security (CARES) ACT.
On April 20, American Airlines, and its subsidiaries, Envoy Air, Piedmont Airlines, and PSA Airlines, entered into a Payroll Support Program Agreement with the Treasury, which will see the Federal government pay financial assistance totalling $5.8 billion. The first instalment, of $2.9 billion was made on April 21, and the firm is expecting three further instalments from May to July 2020.
As compensation to the US government for the provision of financial assistance, American issued a Promissory Note to the Treasury to pay it the initial principal sum of $842.2 million, subject to an increase equal to 30% of the amount of each additional instalment disbursed under the PSP. The Promissory Note will have a total principal sum of approximately $1,714 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 PSP 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%) until the tenth anniversary of the PSP Closing Date when it matures.
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.