On Monday, AMR Corp. (NYSE: AMR), parent of American Airlines, announced that it plans to issue more than $500 million worth of stock and debt in order to raise cash as the fall and winter travel seasons loom. These seasons are generally the slower ones for the airline, so the company is looking to cover any unforeseen expenses. AMR announced that it will sell 30 million shares and as much as 4.5 million more in order to cover overallotments. Using Monday's closing price of $9.03 per share, AMR's total proceeds would range from $270.9 million to $311.5 million.
AMR added that it will sell $250 million worth of senior notes that could convert to stock, with as much as $37.5 million additional notes available for overallotments. Four days earlier, AMR announced that it sold miles in its frequent-flier program and mortgaged planes to line up $2.9 billion in new financing. Some of the plane mortgages included sale-leaseback deals on jets that AMR doesn't own yet. AMR stated that these moves should remove any doubts about its liquidity.
Technically, AMR has spent the past two weeks in rally mode, propelling the stock through resistance from both the $7 level and its 50-week moving average. Now that these layers of resistance have been eclipsed, we could see them act as support.
Moreover, AMR's 10-week moving average is on the cusp of a bullish cross of its 50-week counterpart. Such a move could be a bullish indicator. Further resistance could come from the $10 level as the stock continues to advance. This level has acted as support in the past, which could strengthen the potential resistance.
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