United Airlines decision to pull out of a proposed $2.25 billion private offering due to investors asking for higher than expected yields could be revisited secured against a different pool of assets, according to analysts at Cowen.
United has been an active capital raiser this year, having sourced $2.75 billion via short-term facilities and over $1.1billion from share issues. Last week, United announced their intent to raise another $2.25 billion via private offering of 2023 and 2025 notes, secured by a designated pool of 360 aircraft.
The intention was to use the cash raised to pay off a $2 billion March 2021 maturity term loan which it entered into earlier this year. The bonds, initially intended to yield in the 9% range, were bumped to 11% before the deal was ultimately cancelled – by contrast 10-year US 10 treasuries is currently trading at 0.7%.
According to Cowen, investor dissatisfaction was to the collateral pool United put forward which was comprised of older aircraft prone to devaluation, while United’s fleet's average age is 14.4 years, it has a substantial pool of 757-200s and 767-300s which are close to 20 years old.
This leaves the option of bringing a more palatable set of aircraft to investors and Cowen said this was potentially an option for the carrier, “United may try again with a different set of assets”, said the analyst note.