AirTran to beef up balance sheet with notes, stock offering

AirTran Holdings Inc. said Tuesday it plans to enter the bond market and sell additional stock in an effort to beef up its balance sheet.

The parent company of Orlando-based AirTran Airways said it would offer $75 million in convertible senior notes. It also plans to offer 9 million shares of common stock in a public offering.

An AirTran analyst called the move a “step in the right direction.”

“From a company standpoint, more liquidity is better strategically,” said Daniel McKenzie, an analyst with Next Generation Equity Research in Chicago. “One way to reduce competition is to have a very strong cash position.”

In a report earlier this week, McKenzie said AirTran would benefit by increasing its cash from about $400 million to $750 million. He said the “extra balance sheet muscle” could improve the airline’s quality of life by reducing encroachment from competitors.

But deals that involve convertible notes can dilute shareholder value. Airtran made its announcement after the stock markets closed Tuesday, and in after-hours trading, its stock fell 80 cents, or 13 percent.

AirTran said it plans to use the net proceeds of each of the offerings for general corporate purposes, though it did not elaborate.