MIAMI – Delta Air Lines (DL) is raising US$9bn in what is the biggest debt transaction ever made in the aviation industry. DL seeks huge investor funding to make its way through the pandemic.
Delta originally asked for US$6.5bn, consisting of US$4bn in bonds and US$2.5bn in loans. Delta’s frequent flyer program will back both amounts, a common collateral commitment inspired by United Airlines (UA). This allowed the carrier to announce it would not furlough US Flight Attendants or front-line ground Crew in a memo to employees published early Tuesday.
The debt will help raise the carrier’s liquidity. DL is currently burning around US$750m in cash a month, and passenger volumes are just 30% of what they were last year, according to the aforementioned memo penned by DL CEO Ed Bastian.
Furthermore, with the new funding, DL does not plan to take an additional loan guaranteed by the US government under the CARES Act, according to bnnbloomberg.ca.
A Debt Deal Comprised of Two Parts
Delta is looking to borrow bonds that mature in five years, which could yield about 4.75%. Another part of the bonds is due in eight years, which is marketed close to five percent, according to a person with knowledge of the matter.
The price of the bonds, which carry investment-grade ratings, should come out today, as reported by BNN Bloomberg, citing an undisclosed source familiar with the matter.
Goldman Sachs Group Inc. is responsible for the selling of the bonds. Barclays Plc is responsible for the loan portion. We will soon see today what the outcome will be for DL’s requests, as both obligations are due today.
This is a developing story.
Featured image: Delta Air Lines