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Thursday, May 15, 2008

Mesa Shareholders Approve Stock Sale

Mesa Air Group, Inc. shareholders approved the issuance of shares of common stock as may be necessary to repurchase all of its outstanding Senior Convertible Notes due 2023. Without that approval, Mesa said it could not “guarantee the company would have adequate cash resources” if the issuance were not approved for $37.8 million in new common stock. The move comes shortly after analysts began predicting bankruptcy for the troubled company. Related Story
The money will be used to cover notes due on June 16 in the event the note holders require the company to purchase all or a portion of the notes. The company may now elect to satisfy its repurchase obligations by issuing shares of common stock up to its authorized number of shares.
The value of the new shares, if issued, could be nearly double Mesa's current market capitalization, according to the Associated Press. The move comes at a time when other carriers continue to buy back their shares. As the carrier struggles to regain its footing from the nearly $60 million settlement for Hawaiian airlines as well as general economic conditions and the loss of some of its Freedom Airlines Delta Connection flying – worth $20 million per month – its shares have dropped precipitously since January, coming in at 64 cents, according to its web site. In addition, its go! operation has reportedly lost $20 million since its inception.
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