United Air Unable to Agree to Terms for $2.25B Bond Offering

Airlines have undoubtedly taken a punch to the stomach at the hands of the coronavirus pandemic, and many are scrambling to offer up bonds in order to raise cash in the interim until things return to normal. United Air is the latest to get into the bond party, but the airline was unable to agree to terms on a $2.25 billion bond offering.

“The airline ultimately reached a deal but decided to pull it to seek more favorable terms and potentially a different structure later, said one of the people, who asked not to be named discussing a private transaction. The offering fell flat with investors on concerns about the planes backing the debt,” a Bloomberg report noted.

“Enticed by the hot market for junk bonds, United had been planning to use the new debt to refinance a $2 billion one-year term loan that the company signed with a group of four banks on March 9,” the report added further. “At a yield of 11% based on unofficial price discussions, the potential interest rate was significantly higher than that on the loan, which pays a rate of as much as 2.5 percentage points above the London interbank offered rate over the course of the year.”

With the coronavirus outbreak, the number of travelers taking to the skies certainly saw a marked decrease, but the latest stimulus package by the federal government should help the US Global Jets ETF (NYSEArca: JETS) take-off. JETS seeks to track the performance of the U.S. Global Jets Index, which is composed of the exchange-listed common stock (or depository receipts) of U.S. and international passenger airlines, aircraft manufacturers, airports, and terminal services companies across the globe.

JETS Chart

JETS data by YCharts

High Yield Bond ETF Options

As airlines look to bond offerings, investors looking to add high yield bond exposure to their ETF portfolios can look at the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK). Some market experts question whether this move is nothing more than a small bandage on a gunshot wound.

Investors contemplating a high yield option can take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

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