Turning into the third quarter of 2020 and with the coronavirus lockdown restrictions, airlines and lessors are seeking to raise fresh funds.
Southwest Airlines is in the market with an $1.8 offering of unsecured bonds, comprising $500 million three-year notes, due 2023 paying a 4.750% coupon and yielding 3.750%, and $1.3bn seven-year notes, due 2027, paying 5.125% coupon and yield.
Both tranches of notes are rated Baa1/BBB/BBB+ by Moody’s, S&P and Fitch.
The airline intends to use the proceeds to repay a portion of its $3.3bn 365-day term loan.
The 2023 notes will form a single series with the existing $750 million 4.750% notes due 2023 already issued by Southwest Airlines on May 4, 2020, and will have identical terms, says the airline in an SEC filing.
Joint bookrunners are Citi, BNP Paribas, BofA Securities, JPMorgan, Morgan Stanley, Goldman Sachs and Wells Fargo. Co-managers are Academy Securities, Comerica, Drexel Hamilton, Loop Capital Markets, and Standard Chartered.
In a ratings note, Fitch expresses confidence that Southwest will be able to repay the 365-day loan in full using this issuance and other means, which will free up more unencumbered assets to enable the airline to seek further secured financing options.
“Fitch's models indicate that the additional liquidity should be ample for Southwest to manage through the worst of the economic downturn caused by the coronavirus pandemic and may put the company in a position where it can start paying down a material amount of debt in 2021, assuming that traffic levels start to recover by that point.”
In Europe, the leading aircraft lessor has also priced a jumbo bond offering. AerCap has priced $1.25bn of five-year senior notes at 6.50%.
Citi, Deutsche Bank, HSBC, Mizuho and Morgan Stanley are serving as joint book running managers for the underwritten public offering. CA-CIB, Goldman Sachs, MUFG, Société Générale, and TD Bank are passive joint bookrunners.