American Airlines Group Inc. is kicking off a $7.5 billion sale of bonds and leveraged loans backstopped by its frequent-flyer program, capitalizing on low borrowing costs to repay U.S. government loans that have helped it navigate the pandemic, Bloomberg News reported. The carrier is marketing two $2.5 billion series of notes maturing in 2026 and 2029, and a term loan credit facility of the same amount due in 2028. The new debt, which is secured against the company’s loyalty program, will help refinance American’s $7.5 billion Treasury loan, of which $550 million has been drawn to date, according to an investor presentation Monday. Early pricing discussions are in the low-to-mid 6% range for the five-year notes, and the mid-to-high 6% range for the eight-year portion. Initial pricing on the loan is being discussed at a spread of 500 to 525 basis points over the London interbank offered rate, plus an original issue discount of 98 cents on the dollar with a 1% Libor floor. American opted to refinance the Treasury loan with debt in an amortizing structure, which allows the company to pay back it in pieces leading up to maturity rather than all at once. The new financing gives American greater flexibility and also potentially increases the borrowing capacity of the AAdvantage program, a company spokesman said.
