On April 20, 2020, the Company entered into a Payroll Support Program Agreement with Treasury, pursuant to which the Company may receive a total of up to approximately $334.7 million under the PSP, which funds will be used exclusively to pay for salaries and benefits for our Team Members through September 30, 2020. Of that amount, up to $264.3 million will be a direct grant from Treasury and up to $70.4 million will be in the form of a low-interest loan, as described above in Item 2.03. In connection with its participation in the PSP, the Company also will be obligated to issue to Treasury warrants to purchase up to 500,150 shares of common stock of the Company, par value $0.0001 per share (“Common Stock”), at a strike price of $14.08 per share (the closing price for the shares of Common Stock on April 9, 2020). The warrants will expire in five years from the date of issuance and, at
the Company’s option, may be settled on a “net cash” or “net shares” basis. The warrants will be transferable, have no voting rights, and will contain registration rights as well as customary anti-dilution provisions.
In connection with the Company’s participation in the PSP, we will be subject to certain restrictions, including, but not limited to:
|
|
•
|
Restrictions on payment of dividends and stock buybacks through September 30, 2021
|
|
|
•
|
Requirements to maintain certain levels of scheduled service
|
|
|
•
|
Maintaining employment levels through September 30, 2020
|
|
|
•
|
Limits on certain executive compensation
|
|
|
•
|
Use of the grant funds exclusively for the continuation of payment of employee wages, salaries and benefits
|
On April 21, 2020, the Company received total proceeds of $167.4 million, representing the first installment of funding under the PSP, in exchange for which the Company issued to Treasury the $20.2 million 10-year note described above in Item 1.01 and warrants to purchase 143,541 shares of Common Stock.
The Company expects to apply for additional funds from the Treasury loan program under Title IV, Subtitle B of the CARES Act (“Loan Program”). The expected maximum availability to the Company under the Loan Program is approximately $741 million. Loans are to be secured by collateral to be agreed. Our participation in the Loan Program could materially increase the funds available to the Company as it works through the operational and business issues related to the COVID-19 pandemic or provide a base of available funding that could encourage private market transactions. Any loan pursuant to the Loan Program would be subject to the restrictions and relevant provisions of the CARES Act, including many of those noted above for the PSP. Loans provided under the Loan Program will have a 5-year term with interest payable at an annual rate of LIBOR plus 3.5%. The Company also would be required to issue to Treasury a number of warrants equal to 10% of the final loan principal amount divided by the same strike price as noted above ($14.08), representing a potential conversion of up to 5.3 million of underlying shares of Common Stock.
Forward-Looking Statements in this report and certain oral statements made from time to time by representatives of the Company contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) which are subject to the “safe harbor” created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions intended to identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding the Company's intentions and expectations regarding capacity and passenger demand, additional financing, capital spending, operating costs, hiring, and stakeholders, vendors and government support, as well as statements regarding the Company’s restatement and future amendment to its previously filed 10-K and remediation of its material weakness. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Furthermore, such forward-looking statements speak only as of the date of this release. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Risks or uncertainties (i) that are not currently known to us, (ii) that we currently deem to be immaterial, or (iii) that could apply to any company, could also materially adversely affect our business, financial condition, or future results. Additional information concerning certain factors is contained in the Company's Securities and Exchange Commission filings, including but not limited to the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.