For the past few weeks, a couple dozen corporate lawyers at Vinson & Elkins and Latham & Watkins worked feverishly for their respective clients, Southwest Airlines and American Airlines, to secure billions of dollars in payroll relief funding from federal government.
Transactional lawyers involved said the negotiations were intense and complex, but the results are historic agreements that, in dollar terms, are as large or larger than any capital market fundraiser for either of the Dallas-based airlines. An in-house lawyer at one of the airlines said it is “most likely the most important corporate transaction for either airline since the American merger with US Air” in 2014.
To understand the importance of the agreements with the U.S. Treasury Department, top in-house lawyers at both carriers – Southwest Airlines Chief Legal Officer Mark Shaw and American Airlines General Counsel Priya Aiyar – were directly involved in their respective negotiations.
Under its agreement, American will receive $5.8 billion – $4.1 billion as a direct grant and $1.7 billion as a low-interest loan.
Southwest will get $3.2 billion – $2.3 billion as a grant and $948 million as a low-interest loan, which will be backed by 2.6 million shares of Southwest common stock.
Combined, the two agreements are designed to save about 180,000 jobs at the two airlines through the end of September. The CEOs of both companies describe the agreements as critical to the survival of their airlines.
To understand the size of these transactions, it is 10 times larger than the $500 million private offering American did in February to help fund its pension plans and more than double the value size of Southwest’s $1.4 billion acquisition of AirTran in 2011.
Shaw, deputy general counsel Marilyn Post and corporate counsel Jason Shyung led Southwest’s in-house legal department efforts. Shaw hired V&E partners Robert Kimball and Brenda Lenahan to lead the agreement.
Other V&E lawyers who worked on the transaction include Bailey Pham, Caroline Blitzer Phillips, Tzvi Werzberger, Joanna Enns, Katherine Frank, Michael Makhotin, Cole Renicker, Sydney Verner, Dan Graham, David Peck and Shane Tucker.
Aiya and associate GC Le Lam led American’s in-house efforts. They hired Latham lawyers from New York and Menlo Park to work on the transaction, which was led by Tony Richmond and Ben Berman. Other Latham lawyers involved were Josh Dubofsky, Graeme Smyth, David Raab, Drew Parkes, Brian Howaniec and David Chen.
One of the lawyers involved, speaking on the condition that he or she not be identified, said the transaction was so important, so large and so complex that “it must qualify” as a finalist for the 2020 DFW Corporate Counsel’s M&A Deal of the Year Award.