American Airlines Cracks Biggest Debt Deal in the Industry

Recording the first position of its industry, American Airlines has recorded a $10bn debt deal. The deal highlights the extent to which people are looking for income even in the pandemic hit sectors. On Wednesday, the Texas-based airline issued $6.5 billion worth of junk bonds as a part of the package deal. It also includes the $3.5 billion in loans.

The $10 billion fundraising marks the biggest deal ever by any airline company. Delta’s $9 billion bond and loan sold in September was also beaten by this deal. According to one person familiar with the matter, almost $45 billion worth of orders were drawn from the $10 billion bond and loan.

On Wednesday, both the bond and loan parts of America were increased from $5 billion and $2.5 billion after the investors pushed the debt. It was encouraged by central bank support and desperate for returns. Low-interest rates have pushed investors to search for yield in riskier parts of the market.

Investors have also invested in sectors that have experienced a near-complete grounding of activities for almost a year. American Airlines sold high yield bonds rated Ba2 by credit rating agency Moody’s. It was sold at a far lower interest rate than the 11.75% it paid last summer. Investors were offered a coupon of 5.5% for the five-year $3.5 billion bonds. On the contrary, the eight-year $3 billion bonds had an interest rate of 5.75%.

High-yield or junk bonds are considered to be riskier than their investment-grade counterparts. They also offer higher returns.