MIAMI – JetBlue (B6) announced it is set to offer up to US$650m of convertible senior notes due in 2026 subject to market and other conditions.
Under Rule 144A of the Securities Act of 1933, these notes are being offered only to people reasonably considered to be qualified institutional buyers. B6 plans to give the initial purchasers of the notes the option to buy up to an additional US$100m in aggregate principal amount of the notes within a 13-day period from the date of original issuance.
The airline plans to use the net proceeds from the offering for general corporate purposes, which may include debt repayment, including covid funds from the United States government.
-41% Capacity in Q1 2021
Last week, the carrier said its capacity for the first quarter was down 41% from the year-earlier pre-COVID. The company’s previous guidance showed a decrease of at least 40%.
While booking models remain difficult, the airline claims that bookings among leisure travelers and people visiting friends and relatives have improved. B6 also expects earnings to drop 61 percent to 64 percent year over year in the first quarter.
In order to minimize cash burn, the company also expects total operating costs to drop by 25% year over year. The coronavirus has decimated the airline industry, as well as the entire tourism industry, as people have stopped traveling, and the industry is not expected to recover until at least 2024. Contractscounsel.com defines a senior convertible note as:
“…a debt security that contains an option where the note will convert into a predefined number of shares. A senior convertible note takes priority over all other debt securities that the company may have issued. Like other types of debt investments, the senior convertible notes offer investors the ability to accumulate interest on their investments, but rather than a cash repayment, they are repaid in equity.”
Featured image: JetBlue A321 taking off. Photo: Nate Foy/Airways