(Bloomberg) — JetBlue Airways Corp. is in talks with lenders about selling $1.5 billion in high-yield bonds that would yield about 9.5 percent to 10 percent, according to people with knowledge of the matter.
The airline is also considering taking out a $1.25 billion leveraged loan with a margin of 5 to 5.5 percentage points above the secured overnight financing rate, said the people, who asked not to be identified discussing a private transaction.
Demand for the bond has already been strong, the people said, with orders totaling more than $1.5 billion coming in ahead of the launch, they said. The debt package could hit the market as early as Aug. 12, but talks are ongoing and details could change, they added.
As Bloomberg News reported on Tuesday, JetBlue is working with banks including Barclays Plc and Goldman Sachs Group Inc. on a possible $2.75 billion bond and loan offering that would be backed by the company’s loyalty program.
Representatives for JetBlue and Goldman Sachs declined to comment. A representative for Barclays did not respond to requests for comment.
Turmoil in global markets in recent days threatened to end the summer’s debt boom that had helped some of the riskiest U.S. companies lower their borrowing costs. Four leveraged loan deals were taken out of syndication this week.
But markets are reopening, creating a more positive mood for JetBlue. Numerous leveraged loans and high-yield bonds have been issued since Tuesday, and investment-grade bond issuance reached a high of 2024 on Wednesday.
If JetBlue were to sell a bond with a yield of up to 10 percent, the yield for U.S. junk bonds on the secondary market would average 7.71 percent on Wednesday, according to the Bloomberg U.S. Corporate High Yield Bond Index.
Using a loyalty program as collateral is a popular tactic among airlines. The decision follows JetBlue’s chief financial officer’s statement last week that its loyalty program could be a source of collateral if the airline seeks a debt deal. The company’s upcoming maturities include a $750 million convertible note due in 2026.
– With support from Reshmi Basu, Carmen Arroyo and Mary Schlangenstein.
(Removes references to use of proceeds.)
For more articles like this, visit bloomberg.com