UAL Corp. (UAL), the parent company of United Airlines, has announced a new public offering of $19 million common stock and $175 million convertible senior notes due 2029. The issue has been made in an attempt to raise cash for operations for the coming winter season when demand for air travel remains subdued. The company is bolstering its liquidity by taking advantage of the sentiment that fundamentals in airline industry have improved.
In the public offering, UAL Corp. intends to grant its underwriters an option to acquire an added 2.85 million shares. The company has given the underwriters an option of nearly $26.3 million in additional convertible senior notes.
Proceeds from the stock and debt offers would be used for general purposes. J.P. Morgan (JPM) Morgan Stanley (MS) and Goldman Sachs & Co. (GS) are acting as joint book-running managers of both offerings.
UAL Corp. sold 3,086,883 shares of common stock through Morgan Stanley, as its distribution agent, during the period from Sept. 16, 2009, through Sept. 18, 2009, resulting in net proceeds of approximately $27 million.
In addition to the drop-off in travel because of the recession, United and other airlines have been struggling as profitable business travelers either stay home or fly on cheaper tickets. The company’s passenger revenue is expected to drop as much as 18.8% in the third quarter, with traffic falling as much as 4%, although its costs are declining as well.
Other carriers who had taken similar steps include AMR Corporation (AMR), Delta Air Lines Incorporated (DAL) and US Airways Group Incorporated (LCC).
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