Delta SkyMiles sets tranches, tightens talk in upsized $6 billion notes offering; pricing Wednesday

By Paul A. Harris

Portland, Ore., Sept. 16 – Delta Air Lines Inc. and SkyMiles IP Ltd. upsized the Delta SkyMiles two-part offering of senior secured bullet notes (Baa1//BBB) to $6 billion from $4 billion, according to market sources.

The Rule 144A and Regulation S for life notes offering, being sold off of both the high-yield and investment-grade syndicate desks, features an upsized $2.5 billion tranche of five-year notes that feature 33% annual amortization beginning in year three, with a 3.7-year average weighted life, talked to yield 4½% to 4 5/8%, tightened from earlier talk in the 4¾% area. Initial guidance was in the 5% area. The tranche is upsized from $2 billion.

An upsized $3.5 billion tranche of eight-year notes that feature 33% annual amortization beginning in year six, with a 6.7-year average weighted life, are talked to yield 4¾% to 4 7/8%, tightened from earlier talk in the 5% area. Initial guidance was in the 5 3/8% area. The eight-year notes tranche was also upsized from $2 billion.

The deal's timeline is foreshortened. Final commitments are due at 1 p.m. ET on Wednesday, and the deal is set to price thereafter. It had previously been expected to remain in the market until Thursday.

Goldman Sachs & Co. LLC is the left lead bookrunner. Barclays, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the joint lead bookrunners.

BofA Securities Inc., BBVA Securities Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Fifth Third Securities Inc., PNC Capital Markets LLC, SMBC Nikko Securities America Inc., Standard Chartered Bank, U.S. Bancorp Investments Inc. and Wells Fargo Securities LLC are the joint bookrunners.

Credit Agricole CIB and Natixis Securities Americas LLC are the co-managers.

Features of the credit agreement include a collection account into which SkyMiles and its subsidiaries will be required to deposit all revenues pledged to secure the notes on a first-priority basis, subject to a simplified waterfall provision.

The agreement specifies a reserve account equivalent to three months of interest service, to be funded up front.

The parent is required to maintain minimum liquidity of at least $2 billion.

Along with the upsizing of bond tranches, the concurrent term loan is upsized to $3 billion from $2.5 billion, raising the overall size of the debt being placed – two tranches of notes and the loan – to $9 billion from $6.5 billion.

In a document change which came in conjunction with that upsizing, the priority lien cap increased to $9 billion from $8.5 billion.

Proceeds will be used to fund the reserve accounts and for SkyMiles IP to make a distribution to SkyMiles IP Finance, which will in turn make a distribution to SkyMiles IP Holdings, which will in turn make an intercompany loan to Delta, which intends to use the proceeds for general corporate purposes and to support its liquidity position.

Delta is an Atlanta-based air carrier.

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