Delta Air Lines plans to raise $6.5 billion in cash by using its frequent flier program as collateral, a program being used by other carriers, too.
Delta says they are partnering with SkyMiles IP Ltd., a newly formed Cayman Islands exempted company and a wholly owned subsidiary of Delta, in a private offering to eligible purchasers of senior secured notes and loans that is expected to be bring in $6.5 billion.
The notes and loans will be secured on a pari passu senior basis by a first-priority security interest in Delta’s SkyMiles program, including Delta’s rights under certain related agreements, intellectual property, and other collateral related to the SkyMiles program.
Barron’s reports that “Delta has already raised $16.5 billion since the start of the crisis, and its newly announced plan would raise another $6.5 billion, backed by its SkyMiles program. United Airlines (UAL) and American Airlines (AAL) have both already leveraged their respective frequent flier programs in a bid to secure more cash.”
“SkyMiles IP Ltd. intends to lend the net proceeds from the offering of the Notes and the New Credit Facility to Delta, after depositing a portion of the proceeds in a reserve account,” Delta says in a media release. “The final terms and amounts of the Notes and the New Credit Facility are subject to market and other conditions and may be materially different than expectations. Delta expects to use the proceeds of the Notes and New Credit Facility for general corporate purposes and to bolster its liquidity position.