Delta plans $500 million debt offering

By Kelly Yamanouchi


The Atlanta Journal-Constitution

Atlanta-based Delta Air Lines announced it plans a $500 million private debt offering as it refinances debt from merger partner Northwest Airlines.

Delta plans to use the $500 million in senior secured notes due in 2014, along with new senior secured credit lines, to repay outstanding borrowings by Northwest totaling $904 million.

That debt would come due when Northwest is merged with Delta. Delta expects its single operating certificate from the Federal Aviation Administration for its merger with Northwest at the end of this year.

The airline would use any remaining proceeds for “general corporate purposes.”

Delta plans to use its Pacific route authorities, slots and gate leases to secure the notes. The Pacific assets will also serve as collateral for the new credit lines.

Fitch Ratings said in a report in June that Delta’s declining cash balances could make it difficult to repay debt without better access to financing. Fitch at that time said Delta may need to refinance and estimated the airline’s negative free cash flow could exceed $400 million this year.

Separately, Delta and other airlines are reportedly in talks about making an investment of several hundred million dollars in Japan Airlines.