Alaska Air sells bonds, loan to refinance Hawaiian debt

Alaska Air Group Inc. on Tuesday sold around $2b of debt secured by its frequent flyer program, to refinance borrowings tied to its acquisition of airline Hawaiian Holdings Inc. On Tuesday, Alaska Air subsidiary AS Mileage Plan IP Ltd. sold $1.25b of notes in two parts, according to a person with knowledge of the matter. The longer portion of the offering, a seven-year note, yielded 1.7 percentage point above Treasuries after earlier discussions for around 2.125 percentage points, said the person, who asked not to be identified as the details are private. The same unit also sold a $750m loan maturing in seven years on Tuesday, paying 2 percentage points over the Secured Overnight Financing Rate. The airline didn’t respond to a request for comment. The debt saw relatively high demand, allowing the firm to improve the pricing and boost the originally planned size of the total borrowing. Alaska Air said last month that it planned to borrow $1.5b to help refinance Hawaiian Holdings debt after having acquired the company, a purchase that it said closed on Sept. 18. The acquisition was announced in December. Borrowing on a secured basis is cutting Alaska Air’s borrowing costs by allowing it to win investment-grade ratings for the debt even as the parent company carries junk ratings. On Sept. 24, Moody’s Ratings cut the airline’s credit rating to Ba1, the highest junk level, from Baa3, the lowest investment-grade score. <br/>