United’s banks map debt plan that shields frequent-flyer plan

United is tapping its frequent-flyer program for its biggest debt sale since the pandemic. The pitch? Its miles are a safer bet than the actual airline. A group of banks led by Goldman Sachs Group plans to offload the debt to investors through an offering of leveraged loans and secured bonds that could be completed before the July 4 holiday in the US, according to a person with knowledge of the matter. The unique structure could even see the debt given one investment-grade rating, the person said. The lenders agreed to provide $5b of loans to United in exchange for a claim on MileagePlus, the loyalty program the airline established in 1981. They’re now trying to convince investors to buy into the idea even as hundreds of planes sit idle on tarmac amid a collapse in travel demand. The debt will be issued through bankruptcy-remote entities that United created to house the mileage program, and which is separate from the air carrier’s operations. MileagePlus derived 71% of its cash flow in 2019 from third parties such as credit card companies that award miles to their clients, according to a company presentation. Miles earned by United passengers from flights accounted for the remaining 29%.<br/>