FILE PHOTO: A United Airlines passenger jet takes off with New York City as a backdrop, at Newark Liberty International Airport, New Jersey, U.S. December 6, 2019. REUTERS/Chris Helgren
(Reuters) – United Airlines Holdings Inc (UAL.O) on Tuesday announced a public offering of 39.25 million shares aimed at raising more than $1 billion to help shore up capital in the midst of the coronavirus pandemic.
United’s shares, which closed at $27.88 in regular trade on Tuesday, lost 3% in extended trading. United and other airlines have been punished by a sharp fall in travel demand due to the coronavirus, with United’s stock down 67% over the past three months as the pandemic has spread around the world and forced lockdowns in many countries.
In an effort to boost capital and save costs, U.S. airlines have grounded fleets, raised debt, cut executive salaries and sought government aid.
United is set to receive $5 billion from the U.S. Treasury to cover payroll through Sept. 30 and has said it expects to borrow up to about $4.5 billion from a separate government package for airlines. The airline must issue warrants to the Treasury in exchange for part of those funds.
United on Monday said it expects to report a pre-tax loss of about $2.1 billion for the first quarter.
The stock offering announced Tuesday includes a 30-day option for the underwriters, Morgan Stanley and Barclays, to purchase up to 3.93 million additional shares.
Sources said on Tuesday that the underwriters, which have a greenshoe option to purchase up to 3.93 million additional shares, were marketing the stock in a range of $25.95-$26.50.
In a separate statement on Tuesday, United said it reached a settlement agreement last month with Boeing Co (BA.N) over damages incurred in 2019, when airlines were forced to cancel flights due to the 737 MAX grounding that followed two fatal crashes.
Reporting by Tracy Rucinski, Bharath Manjesh; Editing by Maju Samuel and Leslie Adler