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Southwest in Discussions to Raise New Equity, Debt

Gillian Tan, Crystal Tse and Crystal Kim

(Bloomberg) -- Southwest Airlines Co. is in talks with lenders about raising billions of dollars in new equity and debt to bolster its balance sheet to weather the impact of the coronavirus pandemic, according to people with knowledge of the matter.

The Dallas-based company is in discussions with banks about financing options that would result in billions of dollars of proceeds through the issuance of a mix of common equity, convertible notes and debt, said the people, who asked not to be identified because the matter is private.

Southwest, which is slated to announced first-quarter results Tuesday, could launch capital-markets transactions as soon as this week, the people said. The composition and terms of the financing package are in flux and a final decision has yet to be reached, they said.

A Southwest spokesman declined to comment.

The airline’s shares fell 0.8% at 4:02 p.m. in New York, after Bloomberg reported the talks. They have dropped 46% this year, cutting Southwest’s market capitalization to less than $15 billion.

Chief Executive Officer Gary Kelly last week told employees he’d prefer an across-the-board pay cut to further reduce costs should demand not recover later this year over more dire scenarios such as the first involuntary furloughs in the carrier’s history. The virus outbreak and resulting government-imposed travel restrictions have bludgeoned airlines.

Earlier last week, Southwest said it had finalized terms with the U.S. Treasury Department and will receive more than $3.2 billion to support payroll spending over the next several months.

(Updates with Southwest declining comment in fourth paragraph.)

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