American Airlines launches rights issue plan to protect $16.5 billion tax benefit

Thursday, December 23, 2021

American Airlines said that it is seeking shareholder approval for a rights offering plan to avert any hostile takeovers and preserve a $16.5 billion tax benefit, as the industry grapples with the Omicron coronavirus variant.

The No. 1 U.S. airline said it had cumulative U.S. federal net operating loss carryforwards exceeding $16.5 billion which would be at risk if there is a change in ownership. In January this year, the company had reported a record annual loss of $8.9 billion due to pandemic-induced restrictions and lockdowns.

The airline said it has adopted a tax benefit preservation plan to aid the carrier in reducing its future federal income tax expense.

Under the plan, American Airlines will issue one preferred stock purchase right in the form of a dividend for each outstanding share of American Airlines common stock.

The dividend will be payable on January 5, 2022, the company said, adding that these rights can be exercised by the shareholders only if a person or group acquires a stake of 4.9% or more without the board’s consent.

The rights, if approved, will let the shareholder buy the stock of the world’s biggest airline at a 50% discount rate.

The airline said the rights will expire on December 20, 2022 if there is no shareholder approval. Otherwise, they will expire in December 2024.

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