Home Airlines United Airlines Is Raising $2.25 Billion To Pay Off A Loan

United Airlines Is Raising $2.25 Billion To Pay Off A Loan


Some links to products and travel providers on this website will earn Traveling For Miles a commission that helps contribute to the running of the site. Traveling For Miles has partnered with CardRatings for our coverage of credit card products. Traveling For Miles and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone and have not been reviewed, endorsed, or approved by any of these entities. For more details please see the disclosures found at the bottom of every page.


Updated 19 May 2020: United Airlines has scrapped this bond issue after it failed to receive the interest needed to proceed.

Towards the end of last month, United Airlines announced that it was planning to raise $1.1 billion from a public stock offering to go alongside the $5.0 billion the airline has received from the US government and now the airline is heading back to the markets to raise yet more cash. This time it’s cash that it needs to pay down an existing loan.

On 9 March 2020 United Airlines announced that it was raising $2.0 billion via a term loan facility to allow it to pay “certain transaction fees and expenses and for general corporate purposes” (i.e run the airline) with the loan set to mature on 8 March 2021.

Less than two months later, United now says that it plans to raise $2.25 billion via a private bond offering to allow it to repay the original loan facility early.

Here’s the main body of the announcement:

Today, United Airlines, Inc. (“United”) announced that it intends to commence a private offering to eligible purchasers of $2.25 billion in aggregate principal amount of two series of notes, the senior secured notes due 2023 and the senior secured notes due 2025 (the “Notes”), subject to market and other conditions. The Notes will be guaranteed by United’s parent company United Airlines Holdings, Inc.

United intends to use the net proceeds from the offering of the Notes to repay the $2.0 billion aggregate principal amount outstanding under the term loan facility that United entered into on March 9, 2020 and, to the extent that any net proceeds remain, for general corporate purposes. The final terms and amounts of the Notes are subject to market and other conditions and may be materially different than expectations.

The Notes will be secured initially by first priority security interests in a designated pool of 360 aircraft owned by United.

Based on the numbers provided (and on average) each aircraft that is being used as security for the bond issue is being valued at $6.25m.

Quick Thoughts

With bonds generally charging a lower rate of interest than short-term loans and with these particular bonds offering a longer repayment period than the original loan, it’s probably safe to assume that this is a cost-cutting measure by United.

Assuming the cost to issue and finance the bonds is considerably lower than the interest payments being charged by the original loan plus any penalty fees for early repayment, this seems like a sensible move by United – why pay out any more than you have to at a time where every dollar counts?

I have no idea which aircraft are being used as security to back the bond issue…but I’d love to know. $6.25m per aircraft seems like a low figure to me so I presume the pool contains a sizeable number of smaller and/or older aircraft.

Bottom Line

Net of the original $2.0 billion loan facility, United has now raised (or has been given) $8.35 billion since the beginning of March but it is still poised to cut over 3,400 jobs by the beginning of October – that fact alone should give everyone a pretty good idea of just how hard the airline industry is being hit right now.

A Favorite Card

The Chase Sapphire Preferred Card is Chase’s incredibly popular entry-level travel rewards card which currently offers a welcome bonus of 60,000 Ultimate Rewards Points after you spend $4,000 on purchases in the first 3 months. (Annual fee $95)

Our Favorite Benefits:

  • 5 points/dollar on Lyft rides through 22 March 2022
  • 2 points/dollar for spending on travel and dining worldwide
  • Redeem points at 1.25 cents each when booking travel through Chase Ultimate Rewards.
  • Primary auto rental cover
  • Trip delay reimbursement

Click for more details on the Chase Sapphire Prefered Credit Card

Regarding Comments

Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser or any other advertiser. It is not the bank advertiser’s responsibility or any other advertiser’s responsibility to ensure all posts and/or questions are answered.

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Credit Card News & Offers

Deals

Miles & Points On Sale

Air Fare Deals

Related Posts

 Briggs & Riley Sympatico Collection New Colors

BoardingArea