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NWAESC
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DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 11:45 am

Delta has announced they are looking to secure a $6.5B loan facility backed by SkyMiles.

DL had $19B at the end of Q2. Why put up Skymiles for additional capital right now? Maybe a way to avoid further gov't aid (and any strings attached to that)?

https://news.delta.com/delta-air-lines-announces-proposed-senior-secured-notes-offering-and-term-loan-facility-delta-and
"Nothing ever happens here, " I said. "I just wait."
 
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NWAESC
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 11:54 am

Shares are up a little (1.29%) pre-market on the news. Should be interesting to watch today.
"Nothing ever happens here, " I said. "I just wait."
 
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enilria
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:05 pm

What’s with this? Spirit just issued bonds in the Cayman Islands. I’ve never seen this before in either case. What has caused this change?

> SkyMiles IP Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of Delta
 
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sunking737
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:11 pm

Cash is king. I would think interest rates are low right now too.
"Don't believe it unless its parked on the ramp, or printed in the schedule...SUBJECT TO CHANGE"

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SuseJ772
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:11 pm

enilria wrote:
What’s with this? Spirit just issued bonds in the Cayman Islands. I’ve never seen this before in either case. What has caused this change?

> SkyMiles IP Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of Delta


Spirit or Delta?
Currently at PIE, requesting FWA >> >>
 
smartplane
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:13 pm

Historically, airlines use loyalty programmes as collateral to secure non-specific funding (usually a floating charge). Almost mandatory in the current environment to maintain the status quo when lines expire. Definitely to increase.
 
jayunited
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:14 pm

enilria wrote:
What’s with this? Spirit just issued bonds in the Cayman Islands. I’ve never seen this before in either case. What has caused this change?

> SkyMiles IP Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of Delta



I"m not sure whaat has changed but back in late August Business Insider, and Bloomberg News were all reporting that DL would make this move after Labor Day.
 
dfwking
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:14 pm

NWAESC wrote:
Delta has announced they are looking to secure a $6.5B loan facility backed by SkyMiles.

DL had $19B at the end of Q2. Why put up Skymiles for additional capital right now? Maybe a way to avoid further gov't aid (and any strings attached to that)?

https://news.delta.com/delta-air-lines-announces-proposed-senior-secured-notes-offering-and-term-loan-facility-delta-and


I see two reasons for Delta doing this:

1.) The delta team thinking that the recovery is going to be even longer and see a need to shore up liquidity while they still can
2.) Competitive move to show the government that additional aid is not needed as it can be raised in the capital markets
 
Exeiowa
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:27 pm

I am wondering what the perceived value of a frequent flier program is when travel is down, and how that effects what you can borrow against it and the interest charged. With some credit card providers tightening standards and limits I am also thinking about the desirability of the other end of the product. Well i guess we will see over time.
 
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SuseJ772
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 12:37 pm

Exeiowa wrote:
I am wondering what the perceived value of a frequent flier program is when travel is down, and how that effects what you can borrow against it and the interest charged. With some credit card providers tightening standards and limits I am also thinking about the desirability of the other end of the product. Well i guess we will see over time.


I was wondering the same thing
Currently at PIE, requesting FWA >> >>
 
Packson
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 1:27 pm

Or it could be that management team is doing everything they can including leveraging all assets so they don't have to take government cash that includes strings..... like caps on executive compensation and bonuses?
 
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NWAESC
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 1:29 pm

...so they don't have to take government cash that includes strings..... like caps on executive compensation and bonuses?


Or retaining employees...or maintaining services in certain markets...
"Nothing ever happens here, " I said. "I just wait."
 
MIflyer12
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 1:35 pm

Exeiowa wrote:
I am wondering what the perceived value of a frequent flier program is when travel is down, and how that effects what you can borrow against it and the interest charged.


That's covered in the very first sheet after the cover of the 8-K.

https://d18rn0p25nwr6d.cloudfront.net/C ... 4333c1.pdf
 
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NWAESC
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 1:39 pm

Also from the page MIFlyer12 mentions (bold text is my doing):

"The CARES Act also provides for up to $25 billion in secured loans to the airline industry. While Delta is eligible and entered into a non-binding
letter of intent to the U.S. Department of the Treasury for $4.6 billion under the loan program, Delta has indicated it does not intend to participate in this
program.
"
"Nothing ever happens here, " I said. "I just wait."
 
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jscottwomack
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 1:45 pm

Loan Facility is just another term for a Line Of Credit. They may not need to use it now, but maybe in the future. Just preparing for a longer turn around than expected.
TWA, Ozark, Braniff, Piedmont, USAir, American, Delta, Frontier, Midwest Express, Western, Eastern, Southwest, Northwest, PanAm, United, Mississippi Valley, Britt, Continental, Trans America, Midway, America West, National, American Trans Air, Sun Country
 
MIflyer12
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 1:49 pm

NWAESC wrote:
...so they don't have to take government cash that includes strings..... like caps on executive compensation and bonuses?


Or retaining employees...or maintaining services in certain markets...


Employee retention obligations were part of the CARES Act (mostly grant) provisions of the Payroll Support Program, not the broader pool of business loans, if I'm reading sections 4111-4120 of the Act correctly.

https://www.congress.gov/116/plaws/publ ... ubl136.pdf
 
Brickell305
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 1:49 pm

Another reason why I think another government bailout for airlines should not be considered. There is private financing available and airlines are opting to use that in lieu of already approved government financing. Why allocate more taxpayer money to airlines when there’s already taxpayer money available that they do not want or need?
 
dalmit
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:02 pm

I don't understand the basic concept of using a Frequent Flyer program as collateral. Could someone explain that to me in laymen terms?

I can understand using an airplane as collateral. A bank loans you money, if you can't pay it back, the bank gets the airplane that they can then sell or salvage or whatever.

But if you can't pay back a loan that has a FF program as the collateral does the bank get the program? What good is that? Does the program come with a set number of miles, say 10 billion, that the bank can then sell to American Express or the hotels?

Thanks in advance.
Last edited by dalmit on Mon Sep 14, 2020 2:08 pm, edited 1 time in total.
 
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NWAESC
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:03 pm

MIflyer12 wrote:
Employee retention obligations were part of the CARES Act (mostly grant) provisions of the Payroll Support Program, not the broader pool of business loans, if I'm reading sections 4111-4120 of the Act correctly.

https://www.congress.gov/116/plaws/publ ... ubl136.pdf


I believe you're reading it right; my comment was more about any future stipulations possibly being added as part of any loans.
"Nothing ever happens here, " I said. "I just wait."
 
MIflyer12
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:20 pm

Brickell305 wrote:
Another reason why I think another government bailout for airlines should not be considered. There is private financing available and airlines are opting to use that in lieu of already approved government financing. Why allocate more taxpayer money to airlines when there’s already taxpayer money available that they do not want or need?


You pose that question rhetorically but there is a good answer:

There's fairly broad consensus that the industry needs to shrink (although not unanimity around that point). It's going to be years - not months - before U.S. carriers get back to 2019 revenue levels. It's revenue (and more specifically, revenue against cost) that's important. Passenger numbers are one thing, but analysts have reported that distance flown per passenger is way down, and AA and WN reported yields being way down. Just 50% of the revenue with 75% of 2019 passenger loads doesn't work!

If the industry is going to shrink it needs to do so in an orderly fashion: we can't have carriers hit the metaphorical brick wall at Mach 0.78 when credit disappears (maybe very quickly). Enron went from a Moody's Baa1 (the same as Southwest today!) to Chapter 11 in five weeks, and then proceeded to sell off all assets, effectively liquidating itself.

There's borrowing from the government, which isn't the same as government-guaranteed (the mechanism for 9/11 support used by US, Frontier, and America West). If there's an end to government support there will be job losses. One needs to weigh free-market sensibilities against how rapid and how deep you're willing to see those losses be.
 
TYWoolman
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:24 pm

I think this shows Delta's confidence (betting) in a steady recovery and allows the funds to be used for purposes that may present themselves should a recovery happen faster minus the weight of the gov't.
 
ethernal
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:25 pm

dalmit wrote:
I don't understand the basic concept of using a Frequent Flyer program as collateral. Could someone explain that to me in laymen terms?

I can understand using an airplane as collateral. A bank loans you money, if you can't pay it back, the bank gets the airplane that they can then sell or salvage or whatever.

But if you can't pay back a loan that has a FF program as the collateral does the bank get the program? What good is that? Does the program come with a set number of miles, say 10 billion, that the bank can then sell to American Express or the hotels?

Thanks in advance.


It's the latter. It's not selling existing SkyMiles liabilities already on the books in people's accounts. It's the miles that a bank (e.g. Amex) can then give back to customers as part of its reward program. Almost certainly Delta is giving a significant discount relative to existing SkyMiles agreements because the bank is taking a risk. But conceptually it's a "win-win" in the sense that - in a demand restricted environment - this is trying to monetize excess capacity that otherwise would not be used (competition for cash tickets vs. award tickets aside).

I think Delta is smart to do this, if only because markets are still relatively frothy right now. Risk appetite is (inexplicably) high. Markets tend to be fickle, so who knows how quickly exuberance changes to fear - and at that point, esoteric financing constructs like this may be more difficult to pitch.
 
Tack
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:25 pm

I’ve read all the comments on this and everyone has touched on why this makes sense. This is a smart move. Low interest rates, unencumbered by any federal stipulations on how you run your business and you have tucked away cash to survive. Banks pour billions into those programs buying miles for credit cards. They’re an asset just like a wholly owned aircraft or real estate.
 
Brickell305
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:34 pm

MIflyer12 wrote:
Brickell305 wrote:
Another reason why I think another government bailout for airlines should not be considered. There is private financing available and airlines are opting to use that in lieu of already approved government financing. Why allocate more taxpayer money to airlines when there’s already taxpayer money available that they do not want or need?


You pose that question rhetorically but there is a good answer:

There's fairly broad consensus that the industry needs to shrink (although not unanimity around that point). It's going to be years - not months - before U.S. carriers get back to 2019 revenue levels. It's revenue (and more specifically, revenue against cost) that's important. Passenger numbers are one thing, but analysts have reported that distance flown per passenger is way down, and AA and WN reported yields being way down. Just 50% of the revenue with 75% of 2019 passenger loads doesn't work!

If the industry is going to shrink it needs to do so in an orderly fashion: we can't have carriers hit the metaphorical brick wall at Mach 0.78 when credit disappears (maybe very quickly). Enron went from a Moody's Baa1 (the same as Southwest today!) to Chapter 11 in five weeks, and then proceeded to sell off all assets, effectively liquidating itself.

There's borrowing from the government, which isn't the same as government-guaranteed (the mechanism for 9/11 support used by US, Frontier, and America West). If there's an end to government support there will be job losses. One needs to weigh free-market sensibilities against how rapid and how deep you're willing to see those losses be.

A second bailout would do nothing other than delay the shrinking that needs to take place. There aren’t any major airlines currently in danger of immediate bankruptcy or liquidation. Enron is a bad example as that had to do with corporate malfeasance, not an industry downturn. Yes, there will be job losses. I think it much healthier for both taxpayers and the airlines for the airlines to bite that bullet and staff at the levels they need than for the government to sponsor a ghost worker program. Multiple airlines have been able to avoid involuntary furloughs among their various workgroups, while at the same time refusing state financing in favor of private financing. There is no immediate collapse coming. The prior bailout bought them some time to make some tough decisions. It’s time to execute those now and move forward in a transformed industry.
 
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lightsaber
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:44 pm

Brickell305 wrote:
MIflyer12 wrote:
Brickell305 wrote:
Another reason why I think another government bailout for airlines should not be considered. There is private financing available and airlines are opting to use that in lieu of already approved government financing. Why allocate more taxpayer money to airlines when there’s already taxpayer money available that they do not want or need?


You pose that question rhetorically but there is a good answer:

There's fairly broad consensus that the industry needs to shrink (although not unanimity around that point). It's going to be years - not months - before U.S. carriers get back to 2019 revenue levels. It's revenue (and more specifically, revenue against cost) that's important. Passenger numbers are one thing, but analysts have reported that distance flown per passenger is way down, and AA and WN reported yields being way down. Just 50% of the revenue with 75% of 2019 passenger loads doesn't work!

If the industry is going to shrink it needs to do so in an orderly fashion: we can't have carriers hit the metaphorical brick wall at Mach 0.78 when credit disappears (maybe very quickly). Enron went from a Moody's Baa1 (the same as Southwest today!) to Chapter 11 in five weeks, and then proceeded to sell off all assets, effectively liquidating itself.

There's borrowing from the government, which isn't the same as government-guaranteed (the mechanism for 9/11 support used by US, Frontier, and America West). If there's an end to government support there will be job losses. One needs to weigh free-market sensibilities against how rapid and how deep you're willing to see those losses be.

A second bailout would do nothing other than delay the shrinking that needs to take place. There aren’t any major airlines currently in danger of immediate bankruptcy or liquidation. Enron is a bad example as that had to do with corporate malfeasance, not an industry downturn. Yes, there will be job losses. I think it much healthier for both taxpayers and the airlines for the airlines to bite that bullet and staff at the levels they need than for the government to sponsor a ghost worker program. Multiple airlines have been able to avoid involuntary furloughs among their various workgroups, while at the same time refusing state financing in favor of private financing. There is no immediate collapse coming. The prior bailout bought them some time to make some tough decisions. It’s time to execute those now and move forward in a transformed industry.

It is very sad for the employees, but only those airlines right sized will survive.

There are different ways to do this. Delta has many fa going to alternating schedules (basically, two people sharing one job). Allegiant is reducing hours per employee. There will be layoffs in bulk.

It is already too late to avoid a multi year down cycle.

Lightsaber
Winter is coming.
 
drdisque
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:45 pm

ethernal wrote:
dalmit wrote:
I don't understand the basic concept of using a Frequent Flyer program as collateral. Could someone explain that to me in laymen terms?

I can understand using an airplane as collateral. A bank loans you money, if you can't pay it back, the bank gets the airplane that they can then sell or salvage or whatever.

But if you can't pay back a loan that has a FF program as the collateral does the bank get the program? What good is that? Does the program come with a set number of miles, say 10 billion, that the bank can then sell to American Express or the hotels?

Thanks in advance.


It's the latter. It's not selling existing SkyMiles liabilities already on the books in people's accounts. It's the miles that a bank (e.g. Amex) can then give back to customers as part of its reward program. Almost certainly Delta is giving a significant discount relative to existing SkyMiles agreements because the bank is taking a risk. But conceptually it's a "win-win" in the sense that - in a demand restricted environment - this is trying to monetize excess capacity that otherwise would not be used (competition for cash tickets vs. award tickets aside).

I think Delta is smart to do this, if only because markets are still relatively frothy right now. Risk appetite is (inexplicably) high. Markets tend to be fickle, so who knows how quickly exuberance changes to fear - and at that point, esoteric financing constructs like this may be more difficult to pitch.


Risk appetite is high because traditional safe haven assets (CDs, T-bills, Precious Metals) are paying atrocious returns right now. So blue chip stocks, debt from large companies (even if troubles), and major asset purchases like real estate are viewed as better investments.
 
ethernal
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 2:51 pm

drdisque wrote:
ethernal wrote:
dalmit wrote:
I don't understand the basic concept of using a Frequent Flyer program as collateral. Could someone explain that to me in laymen terms?

I can understand using an airplane as collateral. A bank loans you money, if you can't pay it back, the bank gets the airplane that they can then sell or salvage or whatever.

But if you can't pay back a loan that has a FF program as the collateral does the bank get the program? What good is that? Does the program come with a set number of miles, say 10 billion, that the bank can then sell to American Express or the hotels?

Thanks in advance.


It's the latter. It's not selling existing SkyMiles liabilities already on the books in people's accounts. It's the miles that a bank (e.g. Amex) can then give back to customers as part of its reward program. Almost certainly Delta is giving a significant discount relative to existing SkyMiles agreements because the bank is taking a risk. But conceptually it's a "win-win" in the sense that - in a demand restricted environment - this is trying to monetize excess capacity that otherwise would not be used (competition for cash tickets vs. award tickets aside).

I think Delta is smart to do this, if only because markets are still relatively frothy right now. Risk appetite is (inexplicably) high. Markets tend to be fickle, so who knows how quickly exuberance changes to fear - and at that point, esoteric financing constructs like this may be more difficult to pitch.


Risk appetite is high because traditional safe haven assets (CDs, T-bills, Precious Metals) are paying atrocious returns right now. So blue chip stocks, debt from large companies (even if troubles), and major asset purchases like real estate are viewed as better investments.


Precious metals are hardly safe haven assets that generate returns. :) By definition, they have carrying costs and should be expected to generate negative real returns (which over long enough time horizons they always do).

Regardless of the cause, it doesn't change the fact that markets are willing to take risk right now - that may not be the case tomorrow. When financial market seize up, they are indiscriminate in their lack of desire to lend - or, rather, they are very discriminatory against companies for which there are major cashflow issues.
 
Exeiowa
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 3:00 pm

MIflyer12 wrote:
Exeiowa wrote:
I am wondering what the perceived value of a frequent flier program is when travel is down, and how that effects what you can borrow against it and the interest charged.


That's covered in the very first sheet after the cover of the 8-K.

https://d18rn0p25nwr6d.cloudfront.net/C ... 4333c1.pdf


Thanks for that, so people are redeeming at current travel levels but gaining revenue from credit cards at almost the normal rate (so annual fees and credit card spending tied to program) Presumably the sector of society that engages in this activity are those not yet adversely effected or using these kinds of cards to offset the harm. So this suggest that its actually a good value proposition. (with the one caveat a non operating airlines frequent flier program would not hold value, but that look a very distant prospect)
 
ScottB
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 3:24 pm

dalmit wrote:
]But if you can't pay back a loan that has a FF program as the collateral does the bank get the program? What good is that? Does the program come with a set number of miles, say 10 billion, that the bank can then sell to American Express or the hotels?


Yes, typically the lenders would get the program. But the value in the program comes from the agreements with third parties (Amex, hoteliers, rental car agencies, etc.) to sell and redeem miles, as well as a similar agreement with Delta which would buy miles from the program and provide services (tickets, club memberships, etc.) to the program at some contractual rate. There's also a fair bit of marketing value in having a large list of typically well-off customers with sufficient disposable income to travel.

enilria wrote:
What’s with this? Spirit just issued bonds in the Cayman Islands. I’ve never seen this before in either case. What has caused this change?


I'd imagine it's about tax treatment.
 
panamair
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 3:50 pm

The $6.5 billion they are raising (to be backed by SkyMiles) is made up of three components:
- a term loan facility of $2.5bn
- a $2bn 5 year bond at 5%
- a $2bn 8 year bond at 5.375%
 
panamair
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Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 3:52 pm

SuseJ772 wrote:
enilria wrote:
What’s with this? Spirit just issued bonds in the Cayman Islands. I’ve never seen this before in either case. What has caused this change?

> SkyMiles IP Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of Delta


Spirit or Delta?


I believe he was referring to Spirit’s recent $850m junk bond sale which was backed by NK’s loyalty program
 
dalmit
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Joined: Sat Aug 22, 2020 1:25 pm

Re: DL puts up SkyMiles as collateral for loan facility

Mon Sep 14, 2020 6:18 pm

ScottB wrote:

Yes, typically the lenders would get the program. But the value in the program comes from the agreements with third parties (Amex, hoteliers, rental car agencies, etc.) to sell and redeem miles, as well as a similar agreement with Delta which would buy miles from the program and provide services (tickets, club memberships, etc.) to the program at some contractual rate. There's also a fair bit of marketing value in having a large list of typically well-off customers with sufficient disposable income to travel.


Thanks...the part I was missing was that Delta created a wholly owned subsidiary that will buy miles and mileage award seats from Delta. That subsidiary will become the collateral. I can wrap my head around that.
 
Caymanair
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Re: DL puts up SkyMiles as collateral for loan facility

Tue Sep 15, 2020 4:40 am

enilria wrote:
What’s with this? Spirit just issued bonds in the Cayman Islands. I’ve never seen this before in either case. What has caused this change?

> SkyMiles IP Ltd., a newly formed Cayman Islands exempted company incorporated with limited liability and an indirect wholly owned subsidiary of Delta


I'd imagine the choice of jurisdiction is perhaps related to the source of investment being several other countries. If incorporated in the USA it would likely be taxed multiple times over, where as in Cayman it would be taxed once for each party and not 3 times. Or maybe because all of the service providers are located here, sometimes the case if your lawyer, accountant, banker etc. are located here it's just easier and less costly to do the corporate work here as well.
 
panamair
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Joined: Fri Oct 12, 2001 2:24 am

Re: DL puts up SkyMiles as collateral for loan facility

Wed Sep 16, 2020 6:17 pm

panamair wrote:
The $6.5 billion they are raising (to be backed by SkyMiles) is made up of three components:
- a term loan facility of $2.5bn
- a $2bn 5 year bond at 5%
- a $2bn 8 year bond at 5.375%


Interesting that the total amount of funds coming out of this deal will be around $9.0 billion now instead of $6.5B. The term loan facility has been increased to $3B from $2.5B and the bonds have seen significant demand so much so that the 5 year bond will be $2.5B at 4.5% to 4.625% while the 8 year bond will increase to $3.5B at 4.75% to 4.875%. As of Wednesday morning, investors have placed $16B worth of orders for the bonds and $10B worth for the loans...this led Delta to increase the size of the offering....

https://finance.yahoo.com/news/delta-bo ... 17688.html

Shows that the corporate debt market is still extremely active and open, so Delta is taking advantage of that to secure some more funds now. Some of the proceeds will be used to pay off other loans coming due.
 
9Patch
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Re: DL puts up SkyMiles as collateral for loan facility

Wed Sep 16, 2020 10:41 pm

Aren't miles a liability rather than an asset?
 
MIflyer12
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Re: DL puts up SkyMiles as collateral for loan facility

Wed Sep 16, 2020 11:30 pm

9Patch wrote:
Aren't miles a liability rather than an asset?


The obligation to deliver travel is a liability. The deferred revenue (until travel has been delivered, or, for some other carriers, miles expired) is an asset. The Notes of the Annual Reports for U.S. carriers typically spend some time outlining the transactions and assumptions. Download it and just search for 'SkyMiles' within.
 
smokeybandit
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Re: DL puts up SkyMiles as collateral for loan facility

Wed Sep 16, 2020 11:37 pm

$6.5 billion is a lot of sky miles
 
ScottB
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Re: DL puts up SkyMiles as collateral for loan facility

Thu Sep 17, 2020 12:15 am

panamair wrote:
Shows that the corporate debt market is still extremely active and open, so Delta is taking advantage of that to secure some more funds now.


Well, with the government printing presses running flat out and rates on Treasuries and bank accounts at zero, cash is chasing after something, anything which will produce a return. Snowflake hit the market with its IPO today; its market cap hit $70 billion even though it lost $171 million on $242 million in revenue in the most recent six months of their fiscal year. There is nothing rational about AAL's market cap of $6.6 billion when they had assets of $64.5 billion and liabilities of $67.7 billion as of June 30 (and $4.1 billion of that asset total is goodwill).

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