United Airlines has secured an additional $5 billion in a transaction backed against its MileagePlus loyalty programme, which when added to its previously announced credit facilities and CARES Act cash, brings its expected liquidity for the end of Q3 to $17 billion.
The breaks down to an undrawn $2 billion revolving credit facility, $5 billion of committed financing to be secured by MileagePlus, as well as $4.5 billion expected to be available to United via CARES, according to a Securities and Exchange Commission filing today.
United’s wholly-own subsidiaries, Mileage Plus Holdings (MPU) and Mileage Plus Intellectual Property Assets (MIPA), have taken on Goldman Sachs Lending Partners, Barclays Bank and Morgan Stanley Senior Funding to arrange and syndicate the debt via a term loan facility, which is expected to close in July. Goldmans will act as the sole structuring agent and lead left arranger for the transaction.
In its SEC filing United said that it expected that MPH and MIPA to seek long-term debt financing in lieu of borrowing the full available amount under the committed term loan facility, or in order to refinance amounts drawn under the committed term loan facility, subject to market and other conditions.
The debt issued in the proposed MileagePlus Financing will be secured on a first priority basis by, among other things, the assets of MIPA, MPH and their subsidiaries, specified cash accounts that include the accounts into which MileagePlus revenues are or will be paid by its marketing partners and by United, and pledges of the equity in MIPA, MPH and certain additional subsidiaries.
UAL and United, will provide senior guarantees of the obligations under the proposed MileagePlus Financing. MIPA and MPH will continue to be wholly-owned subsidiaries of UAL and United, and the MileagePlus program is expected to continue to operate as it has in the past.
Multiplying MPH 2019 EBITDA by a factor of 12 equates to a MileagePlus valuation of about $21.9 billion.
In a press release announcing the move United said that MileagePlus’s 100 million members and over 100 program partners means it is an essential asset for United.
“The program has historically generated material and stable revenues and free cash flows, drives customer retention, and increases customer lifetime value,” then firm said in a statement.