MIflyer12 wrote:dfwking wrote:Whether AA files for bankruptcy or not, depends on if it can get to zero / breakeven cash flow before it runs out of cash. Here, "runs out of cash," means it has enough cash to fund operations during chapter 11 bankruptcy proceedings. So, "runs out of cash" is about ~$1 - $2 Bn in remaining liquidity.
No, it's probably quite a bit more than that to remain in compliance with loan covenants on its (now many) borrowings. I'm not going deep into AA's (again, now many) 8-K filings for its borrowings of the last five years but, IIRC, UA stated recently they had a minimum of $3+ Billion. AA, being the riskier borrower (lower credit ratings reflecting more debt, lower unencumbered asset value, and higher rate of cash burn) probably is obligated to keep more.
But, yes, they'll need enough liquidity to operate through Chapter 11 (could be 2+ years) because getting DIP financing would be tough once they've already pledged aircraft, gates, routes, intellectual property and AAdvantage to their limits.
Nobody should be thinking 'Hey, they've got $10 Billion in unencumbered assets. That means they still have $10 Billion in borrowing capacity.' Southwest - still investment grade! - this week announced that they ended $1.8 Billion in borrowing that had tied up $4.5 Billion in aircraft assets. (And 737NGs are still pretty good collateral. Lots of operators worldwide.)
http://otp.investis.com/clients/us/sout ... F&hasPdf=1
"We don't have any covenants on this airlines debt until that liquidity number is down to $2 billion"
https://seekingalpha.com/article/433092 ... conference
With regards to debt, its next major majority is $750M due in 2022
https://www.barrons.com/articles/airlin ... 1584145003