United Mileage talks $2 billion term loan at Libor plus 525-550 bps

By Sara Rosenberg

New York, June 23 – United Mileage Plus launched on Tuesday its $2 billion seven-year first-lien term loan B (//BBB-) with price talk of Libor plus 525 basis points to 550 bps with a 1% Libor floor and an original issue discount of 97, according to a market source.

The term loan is non-callable for three years, then at 104 in year four and 102 in year five, the source said.

Amortization is 20% per annum beginning in year three.

The loan has an interest only period of two years and an expected weighted average life of 4.7 years, the source continued.

Covenants include minimum liquidity of at least $2 billion maintained by the parent.

All revenues of Mileage Plus Holdings LLC and its subsidiaries will be required to be deposited into a collection account pledged to secure the issuance on a first-priority basis.

Amounts received in the collection account will be applied first to pay agents’ fees and expenses, second to pay interest and quarterly amortization, third to fund the reserve account up to the debt service reserve account required balance, fourth, if an early amortization event exists, 50% of all amounts that have been trapped to pay outstanding principal, and fifth, if no early amortization event or default or event of default exists, all remaining amounts will be remitted to the co-borrowers.

The reserve account will be the equivalent of three months of interest service funded upfront.

Goldman Sachs Bank USA, Barclays and Morgan Stanley Senior Funding Inc. are the lead arrangers on the deal.

Commitments are due at noon ET on Friday, the source added.

Proceeds will be used with $3 billion of senior secured notes to refinance a bridge facility, to fund the notes reserve account and the reserve account for the term loan, and to make an intercompany loan to United Airlines Inc. that will be used for general corporate purposes.

Mileage Plus is the loyalty program of United Airlines, a Chicago-based airline company.

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