Delta Air Lines Plans Bond Sale to Repay Pandemic Payroll Loan

(Bloomberg) — Delta Air Lines Inc. is planning to sell investment-grade bonds Thursday to help repay a government loan it took out during the pandemic to pay employees.

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The airline is marketing three-year and five-year notes, according to a person with knowledge of the deal. Initial price discussions for the longer portion are in the area of 1.6 percentage point over Treasuries, the person said, asking not to be identified disclosing private details.

The bonds will help the Atlanta-based carrier repay the US government for a loan it took out in 2020 through a program that was established through the CARES Act and that allowed airlines, whose sales plummeted during the pandemic, to borrow money to pay their workers.

The $1.6 billion loan, which is due in 2030, was the largest of the three that Delta received through the Payroll Support Program, according to a filing. The facility had been accumulating at a 1% interest rate until April, when it switched to a floating rate structure with an interest rate of two percentage points above the Secured Overnight Financing Rate.

The remaining loans Delta has from the government mature a year later than the one it’s refinancing now, and their interest rate won’t change until next year, according to Fitch Ratings.

Delta’s bond sale is among four in the US high-grade market Thursday, with others including Target Corp, First National of Nebraska and the homebuilding company Toll Brothers. Companies are seeking to meet their borrowing needs while funding levels remain attractive — high-grade yields dropped to their lowest since April on Wednesday.

Delta’s notes are expected to be rated Baa2 by Moody’s Ratings and BBB- by both S&P Global Ratings and Fitch Ratings. Barclays Plc, JPMorgan Chase & Co., Morgan Stanley, U.S. Bancorp, and Wells Fargo & Co. are bookrunners for the transaction.

Issuer Profile

Debt distribution: DAL US Equity DDIS

Capital structure: DAL US Equity CAST

Related securities: DAL US Equity RELS

Ratings history: DAL US Equity CRPR

This story was produced with the assistance of Bloomberg Automation

–With assistance from Brian Smith.

(Adds context on loan program and Thursday’s bond sales throughout.)