Delta Looks to Raise $6.5 Billion Backed by Frequent Flyer Program

Delta will use the loyalty program as collateral to secure the new loans.
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Delta Air Lines  (DAL) - Get Report said Monday it was looking to raise $6.5 billion through new bonds and loans backed by its SkyMiles loyalty program as the air carrier struggles to survive the economic shutdown brought on by the coronavirus pandemic.

Shares of the Atlanta-based carrier were up $1.61 tp $32.20 in premarket trading.

SkyMiles IP Ltd. intends to lend the net proceeds from the offering of the notes and the new credit facility to Delta, after depositing a portion in a reserve account.

Delta expects to use the proceeds for general corporate purposes and to bolster its liquidity.

The airline and SkyMiles IP Ltd., a newly created subsidiary named for the loyalty plan, will be co-issuers of the senior secured notes and co-borrowers under the credit facility,

While Delta has said it could furlough nearly 2,000 pilots in October without more federal aid, the air carrier believes it can avoid any flight attendant furloughs through the winter due to strong demand for voluntary departures or leaves.

While Delta has raised $16.5 billion since the start of the pandemic, the carrier is still bleeding about $27 million in cash a day, 

Last week, Delta's Chief Financial Officer Paul Jacobson said that while the airline raised $16.5 billion since the start of the pandemic it is still burning through about $27 million in cash a day,

Delta is eligible for $4.6 billion under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, but the airline has decided not to pursue the government loan, a spokesman said.

U.S. airlines have been devastated by the coronavirus outbreak, which has severely curtailed travel and sparked layoffs.

United Airlines  (UAL) - Get Report sold $6.8 billion of debt in June backed by its MileagePlus frequent-flyer program. American Airlines  (AAL) - Get Report and Alaska Air Group  (ALK) - Get Report also are working to use aspects of their mileage plans as collateral for additional federal loans, Bloomberg reported.

Delta and other airlines recently eliminated their ticket change fees to cope with the low demand for air travel during the global pandemic.

Delta last month said it was generally extending its middle-seat block and limiting the number of customers per flight through at least Jan. 6.