ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On April 20, 2020, Allegiant Travel Company (the “Company”) through its airline operating subsidiary Allegiant Air, LLC entered into a Payroll Support Program Agreement (the “PSPA”) with the U.S. Department of the Treasury (the “Treasury”) for the first installment of an award Allegiant Air is to receive under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The total amount expected to be allocated to Allegiant Air under the Payroll Support Program established under the CARES Act is approximately $171.9 million. Under the PSPA, Allegiant Air has received a grant of $86.0 million and the proceeds must be used exclusively for wages, salaries and benefits.
In consideration for the grant, when the full amount of the award is funded, Allegiant Air will have issued to Treasury a low-interest rate, senior unsecured term promissory note (the “PSP Note”) in the principal amount of approximately $21.6 million, which obligation will mature 10 years after issuance. The PSP Note will be guaranteed by the Company and will be prepayable at any time at par.
Also in consideration for the grant, when the full amount of the award is funded, the Company will issue to Treasury warrants (the “PSP Warrants”) to purchase 25,898 shares of common stock of the Company at a price of $83.33 per share (based on the closing price of the Company’s common stock on The Nasdaq Global Select Market on April 9, 2020). The PSP Warrants will expire five years after issuance, and will be exercisable either through net share settlement or cash, at the Company’s option. The PSP Warrants will include customary anti-dilution provisions, will not have any voting rights and will be freely transferrable, with registration rights.
In connection with the PSPA, the Company will be required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends until September 30, 2021, as well as those restricting the payment of certain executive compensation for periods through March 24, 2022.
The Company has submitted an application to the Loan Program under the CARES Act in the principal amount of approximately $276 million and expects these funds to be available through September 30, 2020 subject to reaching mutually agreeable terms with Treasury.
In connection with the Loan Program, the Company will be required to comply with the relevant provisions of the CARES Act, including those prohibiting the repurchase of common stock and the payment of common stock dividends as well as those restricting the payment of certain executive compensation. Under the CARES Act, these restrictions will apply until one year after the loan is repaid.
Forward-Looking Statements: Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, statements in this Report that are not historical facts are forward-looking statements. These forward-looking statements are only estimates or predictions based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements may include, among others, future funding of the PSPA, the expectation to complete a mutually agreeable loan with the Treasury and the effect of restrictions and obligations thereunder. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believe," "expect," "anticipate," "intend," "plan," "estimate," “project”, “hope” or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. Important risk factors that could cause our results to differ materially from those expressed in the forward-looking statements generally may be found in our periodic reports and registration statements filed with the Securities and Exchange Commission at www.sec.gov. These risk factors include, without limitation, the severity and duration of business disruption caused by the Covid-19 pandemic among other disclosed risks which may impact our operations.