United slaps 11% yield on struggling junk bond sale

United is sweetening the yield on a $2.25b junk-bond sale after investors expressed concerns about the aging fleet pledged as collateral, according to people familiar with the matter. The airline is offering a yield of 11%, which was increased from initial discussions in the low 9% range for the deal, said the people, who asked not to be identified discussing a private transaction. The changes come after the three and five-year bonds had only received about $1.5b of orders as of Thursday morning, the people added. Investors have so far proven eager to lend to companies that have been hit hard by the coronavirus pandemic. But the pushback on United’s deal suggests they still have their limits, and may be reluctant to jump in without the double-digit yields and iron-clad collateral seen in previous offerings. The company has also added a clause that would trigger repayment of the bonds at a substantial premium to par, known as a make-whole, if the company files for bankruptcy, the people said. “This is a good example of a firm being creative in financing unencumbered assets,” said John McClain, a money manager at Diamond Hill Capital Management.<br/>