Delta out with new bond; HNA to spin off Gategroup amid rumours of lease defaults

Eleanor Steed
By Eleanor Steed November 29, 2017 18:03

Delta out with new bond; HNA to spin off Gategroup amid rumours of lease defaults

Delta Air Lines is in the market with a $450 million three-year unsecured notes issuance. The notes, which are rated Baa3, BB+, BBB- by Moody’s / S&P / Fitch, priced at 2.600% and are offered at 99.937% to par. The yield to maturity is 2.622% with a spread to US Treasuries plus 78 basis points.

The notes will rank equally with Delta’s existing unsecured debt and proceeds will be used for general corporate purposes. This is Delta’s second unsecured issuance in 2017. Delta issued $2 billion in unsecured notes in March of this year, using the proceeds to contribute to its pension plans.

Joint bookrunners are Barclays, Citi, Deutsche Bank, Merrill Lynch, US Bancorp, BNP Paribas, Credit Agricole-CIB, Fifth Third and Wells Fargo. Co-managers are BBVA, Siebert and Williams Capital.

Meanwhile, as rumours rumble on about HNA-owned Chinese airlines defaulting on some lease agreements – even only by a month each – the Chinese conglomerate has announced that it intends to spin off Gategroup in a Swiss initial public offering (IPO) as well as dispose of some other assets that are non-core to China’s One Belt, One Road initiative (see Asian news below). Airlines remain a vital part of that initiative and so are likely to remain under HNA, including its leasing entities, however the latter are likely to bear the brunt of any corporate belt tightening, which could leave to further lease payment delays.

Eleanor Steed
By Eleanor Steed November 29, 2017 18:03