United Air Boosts Debt Sale 36% to $6.8 Billion on Demand Surge

(Bloomberg) -- United Airlines Holdings Inc.’s second attempt to pull off a debt sale looks to have worked. The airline boosted the size of the offering on Thursday, with investors clamoring to get a piece of the debt backed by its frequent-flyer program.

The package was increased to $6.8 billion from $5 billion, and the yields are significantly lower than the double-digit ones offered on a $2.25 billion bond sale that the carrier nixed last month after it was unsatisfied with the terms.

The company is now planning to sell $3.8 billion of senior-secured bonds after initially pitching a $3 billion deal, while the leveraged loan portion has been increased by $1 billion to $3 billion, according to people familiar with the matter. Total orders for the combined offering were more than $16 billion earlier on Thursday, the people said, asking not to be identified discussing a private matter.

United’s bond may yield 7% to 7.26%, the same as levels discussed prior to the size increase. The debt is expected to be sold at a discounted price of 98.75 cents on the dollar. The discounted price offered on the loan portion was earlier narrowed to 98 cents on the dollar from 97 cents, and may yield around 7.03% to 7.3%.

Representatives for Goldman Sachs Group Inc., which is leading both the bond and loan sales, and United declined to comment.

United Airlines Kicks Off $5 Billion Frequent-Flyer Debt Sale

The carrier has taken a different approach to this debt raise, its largest since the outbreak of the coronavirus pandemic. This time around the debt is secured by its rewards program and has been viewed more favorably by investors who balked at the age of the planes that backed its prior offering. The new deal was also given investment-grade ratings from Moody’s Investors Service and Fitch Ratings, which both rate the company as junk

The upsize, which investors had anticipated, follows a debt sale by American Airlines Group Inc., which increased the size of its offering twice on Wednesday for a final size of $2.5 billion. Those bonds, backed by slots, gates and routes across the world, have performed poorly in secondary trading, falling to 96.25 cents on the dollar after pricing at 99 cents with an all-in yield of 12.01%.

While the market “might be getting airline’d out” with the slew of airline offerings including American and Delta Air Lines, United’s collateral package was a significantly better prospect, analysts at CreditSights said in a report on Thursday.

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