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.
Delta has said it may furlough around 2,000 pilots in October if it does not receive a new round of federal payroll grants, which it continues to lobby for, but it believes it can avoid cabin crew furloughs thanks to what it claims to be strong demand for voluntary departures.
Delta has parked about 40% of its mainline fleet, including the permanent retirement of certain aircraft, it said in the filing, and has cut its capacity by 60% during the quarter ending in September from last year's figures.
It said in July that it had managed to cut back its daily cash burn to USD27 million by the end of June from about USD100 million a day at the end of March. It had USD15.7 billion in liquidity at the end of June and possesses unencumbered assets worth USD6-7 billion, mainly spare aircraft parts and engines.
Meanwhile, in related news, Delta and Lufthansa (LH, Frankfurt International) and their respective alliances continue to ingratiate themselves with a re-emerging newco Alitalia (AZA, Rome Fiumicino). Delta has, according to the business daily Milano Finanza, offered lucrative slots on transatlantic routes to North and Central America in an effort to stop it from leaving Skyteam and joining the Star Alliance network.
