Delta Airlines (NYSE: DAL) increased the size of a planned debt supply to $ 9 billion, from $ 6.5 billion, due to strong demand for the new debt, Bloomberg reported today. It would be the industry’s biggest debt deal on record, a clear sign that markets remain open to airlines that need additional funds to survive the coronavirus crisis.
Delta on Monday announced plans to sell bonds and enter into a new credit facility backed by its SkyMiles loyalty program, seeking to raise $ 6.5 billion in private funds instead of going to the US Treasury for authorized loans under the CARES Act. The industry is working to raise funds to overcome a slowdown in demand due to the pandemic.
In a filing related to the bond sale, Delta said it expects total seats available in the third quarter to be down 60% from the third quarter of last year, with a international capacity down 80% and national capacity down 50%. Due to the reduction in the number of flights, Delta said it has parked around 40% of its mainline fleet.
The difficult business climate did not dampen interest in bonds. According to Bloomberg, Delta will raise $ 9 billion at yields of up to 4.875%. The report says the airline decided to increase the amount it borrowed after investors placed $ 16 billion in orders for bonds and around $ 10 billion for loans.
Delta’s rivals United Airlines Holdings (NASDAQ: UAL) and American Airlines Group (NASDAQ: AAL) earlier this summer, they said they would use loyalty programs to raise money.
The $ 9 billion offer would exceed the $ 6.8 billion United raised in June after pledging its loyalty program as collateral.