By Paul A. Harris
Portland, Ore., April 14 – United Airlines priced a downsized $4 billion two-part offering of senior secured bullet notes (Ba1/BB-/BB) on Wednesday, according to market sources.
A downsized $2 billion tranche of five-year notes priced at par to yield 4 3/8%, 25 basis points tighter than the 4 5/8% to 4¾% yield talk. Initial guidance in the low-to-mid 5% area.
A downsized $2 billion tranche of eight-year notes priced at par to yield 4 5/8%, also 25 bps tighter than the 4 7/8% to 5% yield talk. Initial guidance was in the mid-to-high 5% area.
In spite of the tight pricing both tranches traded sharply higher, according to a bond trader.
The 4 3/8% notes due 2026 traded to 102½ bid, 103 offered. The 4 5/8% notes due 2029 traded to an eye-popping 104 bid, 104½ offered, the trader said.
The deal was heard to have played to a whopping $26 billion of demand across both tranches, a bond trader said.
Both tranches were downsized from $2.75 billion.
The overall transaction decreased from $5.5 billion, with $150 million shifted to the term loan.
Although the upsized $5 billion term loan came with a 375 bps spread to Libor atop a 0.75% Libor floor at 99.5, and thus was priced relatively comparable to the bonds, the loan has a more issuer friendly prepayment provision versus the bonds, and so will likely save the company some money down the road, according to a sellside source who was watching the transaction.
The size of the airline's refinancing transaction, including the two tranches of notes and the loan, remained unchanged at $9 billion.
Barclays was the lead bookrunner for the notes. Joint bookrunners were J.P. Morgan Securities LLC, BofA Securities Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, BNP Paribas Securities Corp. and Credit Agricole CIB.
The deal is secured by UAL’s domestic FAA slots and international routes, slots, and gates.
The Chicago-based airline plans to use the proceeds plus proceeds from its credit facilities to refinance its existing revolver, its 2017 term loan, and its Coronavirus Aid, Relief, and Economic Security (Cares) Act loan program financing.
| Issuer: | United Airlines, Inc.
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| Amount: | $4 billion, decreased from $5.5 billion
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| Securities: | Senior secured notes
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| Left bookrunner: | Barclays
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| Joint bookrunners: | J.P. Morgan Securities LLC, BofA Securities Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, BNP Paribas Securities Corp. and Credit Agricole CIB
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| Trade date: | April 14
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| Settlement date: | April 21
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| Ratings: | Moody's: Ba1
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| S&P: BB-
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| Fitch: BB
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| Distribution: | Rule 144A and Regulation S
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| Marketing: | Roadshow
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| Five-year notes
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| Amount: | $2 billion, decreased from $2.75 billion
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| Maturity: | April 15, 2026
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| Coupon: | 4 3/8%
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| Price: | Par
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| Yield: | 4 3/8%
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| Call protection: | Non-callable
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| Price talk: | 4 5/8% to 4¾%
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| Eight-year notes
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| Amount: | $2 billion, decreased from $2.75 billion
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| Maturity: | April 15, 2029
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| Coupon: | 4 5/8%
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| Price: | Par
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| Yield: | 4 5/8%
|
| Call protection: | Non-callable
|
| Price talk: | 4 7/8% to 5%
|
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