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Delta Raises Bond Sale to $9 Billion, Largest Debt Offering in Airline History

By Lou Whiteman – Updated Sep 16, 2020 at 3:26PM

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The airline received strong interest in its debt backed by its SkyMiles frequent flyer program.

Delta Air Lines (DAL 2.62%) has increased the size of a planned debt offering to $9 billion, up from $6.5 billion, due to strong demand for the new debt, Bloomberg reported today. That would be the industry's largest debt deal on record, a clear sign that markets remain open to airlines in need of additional funds to survive the coronavirus crisis.

Delta said Monday it intends to sell bonds and enter into a new credit facility backed by its SkyMiles frequent flyer program, seeking to raise $6.5 billion in private funds instead of going to the U.S. Treasury for loans authorized under the CARES Act. The industry is scrambling to raise cash to ride out a slowdown in demand due to the pandemic.

A Delta 777 on the tarmac.

Image source: Delta Air Lines.

In a filing related to the bond sale, Delta said it expects third-quarter total available seats to be down 60% versus the third quarter of last year, with international capacity down 80% and domestic down 50%. As a result of operating fewer flights, Delta said it has parked about 40% of its mainline fleet.

The tough business climate has not dampened interest in the bonds. According to Bloomberg, Delta will raise $9 billion at yields of up to 4.875%. The report said that the airline decided to boost the amount it was borrowing after investors placed $16 billion worth of orders for the bonds and about $10 billion for the loans.

Delta's rivals United Airlines Holdings (UAL 2.50%) and American Airlines Group (AAL 2.65%) earlier this summer said they would use frequent flyer programs to raise cash. 

The $9 billion offering would surpass the $6.8 billion United raised in June after pledging its frequent flyer program as collateral.

Lou Whiteman owns shares of Delta Air Lines. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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