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Copa Airlines Plans to Raise US$350m of Liquidity

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May 04

 by Ryan Taylor
MIAMI – Panama City-based Copa Airlines (CM/CMP) has announced a number of measures to improve liquidity, reduce overheads, and sustain long term economic viability.

As a result of the global pandemic, the airline is already reported to have cut 80% of its route network and grounded a substantial proportion of its 97 aircraft strong fleet.

There were some rumors and reports floating around over the past few days that suggested the airline would be suspending operations entirely, but no official announcement had been made.

However, what is irrefutable is today’s announcement from the airline in which it intends to raise US$350m worth of senior convertible notes to improve its liquidity to stave off the crisis.

A senior convertible note is a debt security that allows the option for its conversion into shares in the company. The plan is for the airline to offer the noteholders the right to convert their notes to shares starting October 15, 2024.

In the stock market filing, the airline said the notes due in 2025 would be priced at 4.5% annum and be offered to institutional buyers. The airline will issue options for the notes worth an additional US$52.5m. The airline plans to start repayment on October 15, 2025, in semi-annual tranches.

Copa was keen to reiterate strong cash reserves of US$1.1b; however, with the airline anticipating expenditures of US$750m through to the end of the year, it doesn’t leave a huge amount of cash in the piggy bank, echoed by the serious warning that the outflow could now be higher than expected.

It is a challenging time for airlines all across the globe as uncertainty lies ahead and economic fear abounds. Numerous airlines have already collapsed into administration; many others have retired older and less efficient aircraft and parked the vast majority of their fleets long term.

The industry looks very different from what it did just six weeks ago, and today’s announcement from Copa Airlines is not the first and will certainly not be the last of an airline focused on remaining solvent in these troubling times.

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