United closes 'largest capital markets' deal
United Airlines has completed a $6.8 billion cash-raising initiative, including an upsized notes offering and term loan.
The carrier secured $3.8 billion in 6.50% senior secured notes due 2027 through a private offering by Mileage Plus, the airline’s loyalty and frequent flyer programme.
The Chicago-based carrier also secured a $3 billion loan with Goldman Sachs. The scheduled maturity date of the loan is June 2027.
Goldman Sachs acted as sole structuring agent and lead left bookrunner. It also provided a “substantial upfront commitment” to the financing programme.
"Significant oversubscription led to a $1.8 billion upsize, tranche optimisation, and ultimately final pricing inside of initial whispers and price talk," says Goldman Sachs. "Successful syndication resulted in a high-quality and diverse order book, with demand from investment-grade, high-yield, and structured products."
The deal is the largest ever capital markets offering by an airline, according to the bank.
“The first-of-its-kind transaction marks the first-ever financing backed by a US airline loyalty programme, helping United obtain cost-effective financing backed by its core asset,” it adds.
The loan will bear interest at a variable rate equal to Libor (but not less than 1% per annum), plus a margin of 5.25% per annum, payable on each payment date.
The effective yield on the deal is 7%. United came to market previously with a $2.25 billion offering, which was later pulled due to investor demand at 11.50% or a rate the airline did not want to pay.
Proceeds from the issuance will be used to provide additional liquidity to United’s balance sheet given the impact of Covid-19.