United throws ‘kitchen sink’ at investors to secure $3bn borrowing

United pledged 352 aircraft, 99 engines and a host of spare parts to investors to refinance emergency loans taken out when the pandemic struck this year, after a similar deal failed to get off the ground in May. The $3b fundraising, led by Goldman Sachs, drew almost twice the investor orders for the seven-year bond than was on offer. The borrowing was finalised on Tuesday with an interest rate of almost 5.9%, according to people familiar with the deal. The borrowing costs are dramatically lower than what United had almost secured in May, when the US airline struggled to find willing lenders even as it offered to pay 10% a year in interest. Investors had balked at the 19-year average age of the planes United had offered as collateral at the time. The new bond includes United aircraft as collateral as well as its spare engines and parts, which were seen as more essential to the business than the old planes it had previously pledged. The planes, parts and engines were packaged together in a so-called enhanced equipment trust certificate. The trust takes possession of the assets until United repays the borrowing, offering lenders stronger protections. Goldman has also provided a liquidity line to cover interest expenses for 18 months if United runs into financial difficulty. Credit rating agencies Moody’s and S&P Global both gave the deal an investment-grade rating — an improvement from the junk label the May borrowing had been awarded.  Roger King, an analyst at CreditSights, said United had thrown the “kitchen sink” at investors to secure the $3bn. “This deal was rejected at 10% and now it’s being accepted around 6%. It’s pretty amazing,” King said. “It’s an amazing feat of financial engineering.”<br/>