JetBlue in Talks to Sell Junk Bonds Yielding Up to 10%

(Bloomberg) -- JetBlue Airways Corp. is in discussions with lenders to sell $1.5 billion of high-yield bonds that would yield about 9.5% to 10%, according to people with knowledge of the matter.

The airline is also considering a $1.25 billion leveraged loan with a margin of 5 to 5.5 percentage points over the Secured Overnight Financing Rate, the people said, who asked not to be named discussing a private transaction. 

Demand has already been strong for the bond, with orders exceeding $1.5 billion during premarketing, the people said. The debt package could launch as soon as Aug. 12, though discussions are ongoing and details could change, they added. 

JetBlue has been working with banks including Barclays Plc and Goldman Sachs Group Inc. on a potential $2.75 billion bond-and-loan offering backed by the company’s loyalty program, Bloomberg News reported on Tuesday. 

Representatives for JetBlue and Goldman Sachs declined to comment. A representative for Barclays did not respond to requests for comment.

Global market turmoil in recent days threatened to end a summer debt boom which helped some of the riskiest US companies cut borrowing costs. Four leveraged loan deals were pulled from syndication this week. 

But markets have been reopening, creating a more-positive tone for JetBlue. Multiple leveraged loans and high-yield bonds have launched since Tuesday, and investment-grade note issuance hit a 2024 high on Wednesday.

JetBlue selling a bond yielding as much as 10% would compare with the average 7.71% yield as of Wednesday for US junk notes in the secondary market, according to the Bloomberg US Corporate High Yield Bond Index. 

Using a loyalty program as collateral has been a popular tactic for airlines, and the choice follows JetBlue’s financial chief saying last week that its loyalty program could be a source of collateral if the airline pursued a debt deal. The company’s upcoming maturities include a $750 million convertible bond due in 2026.

--With assistance from Reshmi Basu, Carmen Arroyo and Mary Schlangenstein.

(Removes references to use of proceeds.)

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