UAL Corporation (
UAUA), the parent company of United Airlines, has announced the issue of $810 million notes to pay off existing debt. The $810 million in pass-through securities raised consists of $697 million of Class A certificates with a coupon interest rate of 9.75% expiring in Jan. 2017 and $113 million of Class B certificates with an interest rate of 12.0% expiring in Jan. 2016. A pass-through security is a fixed-income certificate against certain mortgage-backed securities, generally aircraft.
Of the total proceeds raised from the offering, $493 million will be used to pay off equipment trust certificates issued from 2000 to 2002, while the remaining of the funds will be used for general corporate purposes.
J.P. Morgan (
JPM),
Morgan Stanley & Co. (
MS),
Goldman Sachs & Co. (
GS) are acting as joint book-running managers for the issue.
In addition to the drop-off in travel because of the recession, United and other airlines have been struggling as profitable business travelers either stay home or fly cheaper elsewhere. United Airlines reported a 1.6% fall in October 2009 traffic. Capacity was reduced 4.3% to 11.64 billion available seat miles. With jet fuel prices on the rise, the company’s cash flow is expected to remain under pressure.
Other carriers that have raise funds include
AMR Corporation (
AMR),
Delta Air Lines Incorporated (
DAL) and
US Airways Group Incorporated (
LCC). According to the IATA a total of $8 million has been raised in new cash in the past two months by the world’s leading airlines.
Read the full analyst report on "UAUA"Read the full analyst report on "AMR"Read the full analyst report on "DAL"Read the full analyst report on "LCC"Read the full analyst report on "JPM"Read the full analyst report on "GS"Read the full analyst report on "MS"Zacks Investment Research
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