Delta to back $6.5bn bonds and loans with loyalty scheme

Delta Air Lines (DL, Atlanta Hartsfield Jackson) will try to raise USD6.5 billion through bonds and a new loan facility secured by its SkyMiles loyalty scheme, it revealed in a statement and a Securities and Exchange Commission filing dated September 14. The airline said that both it and SkyMiles IP, a newly formed Cayman Islands-based subsidiary, intend to launch a private offering to eligible purchasers of senior secured notes in one or more tranches. They would then enter into a senior secured term loan facility simultaneously with the closing of the bond issue, the statement explained. The bonds and loans will be secured by the carrier’s SkyMiles programme as collateral, as well as “intellectual property and other collateral related to” SkyMiles. SkyMiles IP will lend the net proceeds from the offering of the notes and the new credit facility to Delta, after depositing part of the proceeds in a reserve account. The bonds’ and loans’ final terms and amounts will depend on market and other conditions, Delta said, and “may be materially different than expectations.” Delta expects to use the proceeds to bolster its liquidity position and for general corporate purposes. It did not disclose the value of the loyalty programme. Delta mentioned in the securities filing that it “has indicated it does not intend to participate” in a loan it is eligible for under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, even though it entered into a non-binding letter of intent for it with the US Treasury. It has already received USD5.4 billion in CARES emergency relief, which was paid in instalments through July. CARES Act loans have alluring financing terms but freeze executive pay and share buybacks.