US Airways Seeks Increase In Stock

By Darren Shannon

US Airways is seeking shareholder approval to double the amount of common shares it can issue, a move that will give the company more flexibility to raise much-needed funds but also dilute investors’ current holding in the airline.

The Tempe, Ariz.-based airline’s board of directors in a shareholder notice issued late May 26 unanimously recommended the issue of 200 million shares, citing constraints on the company’s current share holding. It noted that from an initial authorized stock of 200 million common shares 131.8 million have already been released, but debt commitments mean only 7 million are available should US Airways require more money.

One such commitment was the May 13 issue of $172.5 million worth of debt that can be converted to almost 37.8 million shares. At the same time, US Airways also offered about 17.5 million shares of common stock under a plan that raised a total of about $234 million in cash.

“The availability of additional authorized shares will provide us with the flexibility in the future to issue shares of US Airways Group common stock for corporate purposes such as acquisitions, raising additional capital, paying dividends in stock or effecting stock splits, settling outstanding obligations, sales of stock or securities convertible into or exercisable for common stock, providing equity incentives to employees, officers and directors, and other general corporate purposes,” the board noted.

“We believe that this will provide us with additional flexibility to meet business and financing needs as and when they may arise,” it continued.

The new shares will have the same value and rights as the initial 200 million.

The board of directors also asked that the request not be misinterpreted. “Although an increase in the authorized shares of US Airways Group common stock could, under certain circumstances, be construed as having an anti-takeover effect, the proposed increase in shares authorized is not in response to any effort by any person or group to accumulate US Airways Group common stock or to obtain control of us by any means,” it noted.

“[T]he proposal is not part of any plan by our board of directors to recommend or implement a series of anti-takeover measures,” the airline added.

US Airways’ shareholders will vote on the proposal at the company’s June 10 annual general meeting.

Photo: US Airways

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