On Friday, the U.S. Department of the Treasury said that it planned to conduct a series of auctions to sell the warrants to purchase stock in U.S. airlines that it received after Congress approved $54 billion in COVID-19 air carrier assistance in 2020 and 2021. Its press release read,
The U.S. Department of the Treasury announced today its intention to conduct a series of auctions to sell its warrants to purchase the common stock of certain publicly traded airlines to qualified institutional buyers, institutional accredited investors, or the issuing airlines. The proceeds of these sales will provide additional returns to the American taxpayer from the financial assistance and liquidity that Treasury provided to these airlines during the pandemic.
Treasury provided financial assistance and loans to U.S. airlines and certain other types of businesses in 2020 and 2021 under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act); the Consolidated Appropriations Act, 2021; and the American Rescue Plan Act of 2021. Information about these programs, the warrants being sold, and the auction procedures is available here.
Airlines were required to repay $14 billion, out of the $54 billion awarded as assistance. Treasury received warrants to purchase stock at the share price of the time of the government awards.
Named as Federal Payroll aid, airlines, those accepted government assistance, were barred from imposing furloughs or firing workers and faced limits on executive compensation and bans on stock buybacks and dividends that expired in September 2022.
U.S. Department of the Treasury plans to engage financial agents in the process of auctions, those expected to commence the week of June 3, and the warrants can only be purchased by qualified institutional buyers, it's release read,
Treasury will be supported by its financial agents, Houlihan Lokey Capital, Inc. and Loop Financial Consulting Services, LLC, to help coordinate and conduct the auctions.
Prospective bidders interested in participating in an auction must deliver a complete Bid Package (as defined in the auction procedures) by 5:00 p.m. Eastern Time on May 24, 2024. The auctions are expected to commence the week of June 3, 2024.
American Airlines was benefitted the most by receiving $12.6 billion in government assistance, followed by Delta Air Lines for an amount of $11.9 billion, while United Airlines received $10.9 billion, and Southwest Airlines stood at $7.2 billion. Seven other carriers received lesser assistance, that included $2.2 billion for Alaska Airlines.
However, these aids were questioned many times about its effective outcome. By July 2021, through Multiple Negotiations, Congress aprroved $54 billion Aid to upkeep the Aviation workers Since March 2020, and as a Pre-condition, airlines were prohibited from furloughing workers, but airlines did their own arrangements to cut costs that included thousands of employees taking voluntary buyouts and early retirement.
Department of the Treasury further added that the auction transactions will be exempt from the Securities Act of 1933, as amended (the Act) and the warrants that will be sold in the auctions have not been, and will not be, sold pursuant a registration statement under the Act, and may not be offered or sold in the United States or to, or for the benefit of, U.S. persons absent registration under, or an applicable exemption from, the registration requirements of the Act and applicable state securities law.
About the qualification of the institutional buyers, Department of the Treasury said ,
The warrants will be offered only to (1) “qualified institutional buyers” as defined in Rule 144A under the Act, (2) certain institutional “accredited investors” as defined in Rule 501(a) under the Act, and (3) the issuers of the relevant warrants.
Neither this press release nor the information regarding the auction on Treasury’s website constitute an offer to sell or the solicitation of an offer to buy the warrants or any other securities (including the underlying shares of common stock), and shall not constitute an offer, solicitation or sale in any jurisdiction in which, or to any persons to whom, such offering, solicitation, or sale would be unlawful.
During the Pandemic period, and following the financial assistance to the carriers, Government figures said that around 35,000 airlines staffs due to the Pandemic and the jobs were restored when Congress extended the payroll relief.
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