Delta Seeking $9B in Bonds
09-16-2020, 09:47 AM
#1
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Joined APC: Jan 2011
Position: Resting
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Delta Seeking $9B in Bonds
-Why so much?
-Why bonds over loans?
Discuss....
Delta already has $15B liquidity and is raising another $9B. There is no business projection that indicates Delta needing $24B in liquidity to ride out the pandemic. I believe they are loading up on purchasing power to take advantage of opportunities over the next few years. They are looking past 2021, and want to eliminate the need to have financing contingencies for purchases of distressed assets from other airlines. Bonds probably cost them an extra 1-2% in interest over loans but allows them to push back maturity dates and to raise an even larger amount. Beginning in 2021, most airlines will be severely cash strapped and be ill equipped to generate loans. Few airlines have a compelling enough balance sheet to raise this kind of money, and it’s likely that Delta is leaning on that advantage. Only time will tell if the premium they are paying for these bonds will be offset by lucrative acquisitions down the road. One thing we know for sure now, Delta has the ability to raise any amount of money necessary to weather the pandemic, and with this bond offering would have enough money to last for years.
-Why bonds over loans?
Discuss....
Delta already has $15B liquidity and is raising another $9B. There is no business projection that indicates Delta needing $24B in liquidity to ride out the pandemic. I believe they are loading up on purchasing power to take advantage of opportunities over the next few years. They are looking past 2021, and want to eliminate the need to have financing contingencies for purchases of distressed assets from other airlines. Bonds probably cost them an extra 1-2% in interest over loans but allows them to push back maturity dates and to raise an even larger amount. Beginning in 2021, most airlines will be severely cash strapped and be ill equipped to generate loans. Few airlines have a compelling enough balance sheet to raise this kind of money, and it’s likely that Delta is leaning on that advantage. Only time will tell if the premium they are paying for these bonds will be offset by lucrative acquisitions down the road. One thing we know for sure now, Delta has the ability to raise any amount of money necessary to weather the pandemic, and with this bond offering would have enough money to last for years.
Last edited by mikea72580; 09-16-2020 at 10:02 AM.
09-16-2020, 10:02 AM
#3
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Joined APC: Sep 2014
Posts: 654
Originally Posted by Scooter432
money is cheap right now, also getting ready to pounce when the opportunity presents itself.
SWA and Delta are the only airlines in position that are declining the CARES loans, very telling.
SWA and Delta are the only airlines in position that are declining the CARES loans, very telling.
09-16-2020, 10:14 AM
#5
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Joined APC: Dec 2015
Posts: 845
Originally Posted by mikea72580
-Why so much?
-Why bonds over loans?
Discuss....
Delta already has $15B liquidity and is raising another $9B. There is no business projection that indicates Delta needing $24B in liquidity to ride out the pandemic. I believe they are loading up on purchasing power to take advantage of opportunities over the next few years. They are looking past 2021, and want to eliminate the need to have financing contingencies for purchases of distressed assets from other airlines. Bonds probably cost them an extra 1-2% in interest over loans but allows them to push back maturity dates and to raise an even larger amount. Beginning in 2021, most airlines will be severely cash strapped and be ill equipped to generate loans. Few airlines have a compelling enough balance sheet to raise this kind of money, and it’s likely that Delta is leaning on that advantage. Only time will tell if the premium they are paying for these bonds will be offset by lucrative acquisitions down the road. One thing we know for sure now, Delta has the ability to raise any amount of money necessary to weather the pandemic, and with this bond offering would have enough money to last for years.
-Why bonds over loans?
Discuss....
Delta already has $15B liquidity and is raising another $9B. There is no business projection that indicates Delta needing $24B in liquidity to ride out the pandemic. I believe they are loading up on purchasing power to take advantage of opportunities over the next few years. They are looking past 2021, and want to eliminate the need to have financing contingencies for purchases of distressed assets from other airlines. Bonds probably cost them an extra 1-2% in interest over loans but allows them to push back maturity dates and to raise an even larger amount. Beginning in 2021, most airlines will be severely cash strapped and be ill equipped to generate loans. Few airlines have a compelling enough balance sheet to raise this kind of money, and it’s likely that Delta is leaning on that advantage. Only time will tell if the premium they are paying for these bonds will be offset by lucrative acquisitions down the road. One thing we know for sure now, Delta has the ability to raise any amount of money necessary to weather the pandemic, and with this bond offering would have enough money to last for years.
09-16-2020, 10:16 AM
#6
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Joined APC: Apr 2018
Posts: 2,987
Originally Posted by mikea72580
-Why so much?
-Why bonds over loans?
Discuss....
Delta already has $15B liquidity and is raising another $9B. There is no business projection that indicates Delta needing $24B in liquidity to ride out the pandemic. I believe they are loading up on purchasing power to take advantage of opportunities over the next few years. They are looking past 2021, and want to eliminate the need to have financing contingencies for purchases of distressed assets from other airlines. Bonds probably cost them an extra 1-2% in interest over loans but allows them to push back maturity dates and to raise an even larger amount. Beginning in 2021, most airlines will be severely cash strapped and be ill equipped to generate loans. Few airlines have a compelling enough balance sheet to raise this kind of money, and it’s likely that Delta is leaning on that advantage. Only time will tell if the premium they are paying for these bonds will be offset by lucrative acquisitions down the road. One thing we know for sure now, Delta has the ability to raise any amount of money necessary to weather the pandemic, and with this bond offering would have enough money to last for years.
-Why bonds over loans?
Discuss....
Delta already has $15B liquidity and is raising another $9B. There is no business projection that indicates Delta needing $24B in liquidity to ride out the pandemic. I believe they are loading up on purchasing power to take advantage of opportunities over the next few years. They are looking past 2021, and want to eliminate the need to have financing contingencies for purchases of distressed assets from other airlines. Bonds probably cost them an extra 1-2% in interest over loans but allows them to push back maturity dates and to raise an even larger amount. Beginning in 2021, most airlines will be severely cash strapped and be ill equipped to generate loans. Few airlines have a compelling enough balance sheet to raise this kind of money, and it’s likely that Delta is leaning on that advantage. Only time will tell if the premium they are paying for these bonds will be offset by lucrative acquisitions down the road. One thing we know for sure now, Delta has the ability to raise any amount of money necessary to weather the pandemic, and with this bond offering would have enough money to last for years.
09-16-2020, 10:36 AM
#8
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Joined APC: Mar 2015
Position: stake holder ir.delta.com
Posts: 10,027
Delta has some sizable debt obligations maturing before next summer. If this gets worse the cost of capital will go up. If this gets better it will be next summer when the real revenue/profits will be made and not before. Break even maybe but not much more. they need to have the refinancing done before more bad news and before the maturities. All that said, $9B is more than just for refinancing and a good portion of that is now dry powder. Let no crisis go to waste.
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