Air Transport Services Group, Inc. (NASDAQ: ATSG) today announced its intention to offer, subject to market and other conditions, $350,000,000 aggregate principal amount of convertible senior notes due 2029 (the “notes”) in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). ATSG also expects to grant the initial purchasers of the notes a 30-day option to purchase up to an additional $50,000,000 principal amount of notes.

The notes will be senior, unsecured obligations of ATSG, will accrue interest payable semi-annually in arrears and will mature on August 15, 2029, unless earlier repurchased, redeemed or converted. Noteholders will have the right to convert their notes in certain circumstances and during specified periods. ATSG will settle conversions in cash and, if applicable, shares of its common stock.

The notes will be redeemable, in whole or in part (subject to certain limitations), for cash at ATSG’s option at any time, and from time to time, on or after August 15, 2026 and on or before the 50th scheduled trading day immediately before the maturity date, but only if the last reported sale price per share of ATSG’s common stock exceeds 130% of the conversion price for a specified period of time. The redemption price will be equal to the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

If certain corporate events that constitute a “fundamental change” occur, then noteholders may require ATSG to repurchase their notes for cash. The repurchase price will be equal to the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date.

The interest rate, initial conversion rate and other terms of the notes will be determined at the pricing of the offering.

ATSG expects to use a portion of the net proceeds from the offering to repurchase shares of its common stock concurrently with the pricing of the offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as ATSG’s agent, and to repurchase shares of its common stock from Amazon.com, Inc. under an existing agreement. ATSG expects to use a portion of the net proceeds from the offering to repurchase approximately $200 million aggregate principal amount of its outstanding 1.125% Convertible Senior Notes due 2024 (the “2024 Notes”) concurrently with the pricing of the offering in privately negotiated transactions effected through one of the initial purchasers of the notes or its affiliate, as ATSG’s agent. ATSG intends to use the remainder of the net proceeds from the offering to satisfy fees and expenses associated with the offering, to repay a portion of the outstanding borrowings under its revolving credit facility and for general corporate purposes. Holders of the 2024 Notes that are repurchased in the concurrent repurchases described above may purchase shares of ATSG’s common stock in the open market to unwind any hedge positions they may have with respect to the 2024 Notes. These activities may affect the trading price of ATSG common stock and, if conducted concurrently with this offering, may result in a higher initial conversion price for the notes ATSG is offering. The concurrent repurchases of shares of ATSG’s common stock described above may result in the common stock trading at prices that are higher than would be the case in the absence of these repurchases, which may result in a higher initial conversion price for the notes. The repurchase of common stock in connection with the offering will not reduce availability under ATSG’s stock repurchase program authorized on November 29, 2022.

In connection with issuing the 2024 Notes, ATSG entered into convertible note hedge transactions (the “existing convertible note hedge transactions”) and warrant transactions (the “existing warrant transactions,” and, together with the existing convertible note hedge transactions, the “existing call spread transactions”) with certain financial institutions (the “existing option counterparties”). In connection with ATSG’s intended repurchase of the 2024 Notes, ATSG expects to enter into agreements with the existing option counterparties to terminate a portion of such existing call spread transactions, in each case, in a notional amount corresponding to the amount of such 2024 Notes repurchased. In connection with any termination of any of the existing call spread transactions and the related unwinding of the existing hedge position of the existing option counterparties with respect to such transactions, such existing option counterparties and/or their respective affiliates may sell shares of ATSG’s common stock in the open market or in secondary market transactions, and/or enter into or unwind various derivative transactions with respect to ATSG’s common stock. This hedge unwind activity could decrease (or reduce the size of any increase in) the market price of ATSG common stock at that time and it could decrease (or reduce the size of any increase in) the market value of the notes. In connection with the unwind of the existing call spread transactions, ATSG may make or receive payments in amounts that depend on the market value of ATSG common stock at the pricing of the notes.

The offer and sale of the notes and any shares of common stock issuable upon conversion of the notes have not been, and will not be, registered under the Securities Act or any other securities laws, and the notes and any such shares cannot be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. This press release does not constitute an offer to sell, or the solicitation of an offer to buy, the notes or any shares of common stock issuable upon conversion of the notes, nor will there be any sale of the notes or any such shares, in any state or other jurisdiction in which such offer, sale or solicitation would be unlawful.

About ATSG

ATSG is a leading provider of aircraft leasing and cargo and passenger air transportation and related services to domestic and foreign air carriers and other companies that outsource their cargo and passenger airlift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including three airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, passenger ACMI and charter services, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Airborne Maintenance and Engineering Services, Inc., including its subsidiary, Pemco World Air Services, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Omni Air International, LLC. For more information, please see www.atsginc.com.

Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the anticipated terms of the notes being offered, the completion, timing and size of the proposed offering and the intended use of the proceeds. Forward-looking statements represent ATSG’s current expectations regarding future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Among those risks and uncertainties are market conditions, including market interest rates, the trading price and volatility of ATSG’s common stock and risks relating to ATSG’s business, including those described in periodic reports that ATSG files from time to time with the SEC. ATSG may not consummate the proposed offering described in this press release and, if the proposed offering is consummated, cannot provide any assurances regarding the final terms of the offering or the notes or its ability to effectively apply the net proceeds as described above. The forward-looking statements included in this press release speak only as of the date of this press release, and ATSG does not undertake to update the statements included in this press release for subsequent developments, except as may be required by law.

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