JetBlue Announces Pricing of $2,000 Million Senior Secured Notes Offering and $765 Million Term Loan

Rhea-AI Summary

JetBlue Airways (NASDAQ: JBLU) has announced the pricing of its Loyalty Financings, consisting of $2,000 million in 9.875% senior secured notes due 2031 and a $765 million senior secured Term Loan B due 2029. The notes offering was increased by $500 million from the previously announced $1,500 million, with a corresponding decrease in the Term Loan size. The Loyalty Financings, expected to close around August 27, 2024, will be guaranteed by certain JetBlue subsidiaries and secured by collateral related to JetBlue's TrueBlue® customer loyalty program. The net proceeds will be used for general corporate purposes. The notes are being offered only to qualified institutional buyers under Rule 144A and outside the US under Regulation S of the Securities Act.

Positive

• Successful pricing of $2,000 million in senior secured notes
• Additional $765 million secured through Term Loan B
• Increased notes offering by $500 million from initial announcement
• Secured financing backed by valuable TrueBlue® loyalty program

Negative

• High interest rate of 9.875% on senior secured notes
• Significant increase in debt obligations

Financial Analyst

JetBlue's $2.765 billion debt offering signals a significant financial move, potentially aimed at strengthening liquidity or refinancing existing debt. The 9.875% interest rate on the senior secured notes is notably high, reflecting current market conditions and possibly JetBlue's credit profile. This could impact the company's future interest expenses and profitability. The use of the TrueBlue® loyalty program as collateral is an interesting strategy, highlighting the value of customer data and loyalty in the airline industry. However, investors should consider the long-term implications of leveraging this asset. The increased offering size from $1.5 billion to $2 billion for the notes suggests strong demand, which is a positive sign for JetBlue's market perception.

Market Research Analyst

This debt offering comes at a important time for the airline industry, which is still recovering from the pandemic's impact. JetBlue's move to secure $2.765 billion in financing could be seen as a proactive step to bolster its financial position amidst ongoing challenges such as fuel price volatility and changing travel patterns. The use of the loyalty program as collateral is a growing trend in the industry, with other major airlines having employed similar strategies. This could potentially limit JetBlue's flexibility with the TrueBlue® program in the future. The high interest rate of 9.875% might raise concerns about the company's debt servicing costs in the coming years, especially if travel demand fluctuates.

Legal Expert

The structure of this debt offering, involving a newly formed Cayman Islands entity, suggests careful tax and legal planning. This offshore arrangement could potentially offer tax benefits or regulatory advantages for JetBlue. The offering's limitation to "qualified institutional buyers" under Rule 144A and Regulation S exemptions indicates a strategic choice to avoid the more stringent requirements of a public offering. This approach allows for faster execution but limits the potential investor base. The pari passu security structure ensures equal treatment of the notes and term loan, which is favorable for investors. However, the use of the loyalty program as collateral could have implications for customer data protection and program management, potentially requiring careful navigation of privacy laws and regulations.

NEW YORK--(BUSINESS WIRE)-- JetBlue Airways Corporation (NASDAQ: JBLU) (“JetBlue”) today announced that JetBlue and JetBlue Loyalty, LP (the “Loyalty LP” and, together with JetBlue, the “Issuers”), a newly formed Cayman Islands exempted limited partnership and an indirect wholly-owned subsidiary of JetBlue, priced their (1) $2,000 million aggregate principal amount of 9.875% senior secured notes due 2031 (the “Notes”) and (2) $765 million senior secured Term Loan B due 2029 (the “Term Loan” and, together with the Notes, the “Loyalty Financings”). The Notes offering was increased by $500 million from the previously announced offering size of $1,500 million in connection with a decrease to the size of the Term Loan.

JetBlue expects to close the Loyalty Financings on or about August 27, 2024, subject to the satisfaction of customary conditions. The Issuers intend to use the net proceeds from the Loyalty Financings for general corporate purposes.

The Loyalty Financings will each be guaranteed by certain subsidiaries of JetBlue. The Loyalty Financings will be secured, on a pari passu basis, by certain collateral in connection with JetBlue’s customer loyalty program, TrueBlue^®.

This press release does not constitute an offer to sell or a solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration and qualification under the securities laws of such state or jurisdiction.

The Notes are being offered only to persons reasonably believed to be “qualified institutional buyers” in an offering exempt from registration in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States in reliance on Regulation S under the Securities Act. The Notes proposed to be offered will not be registered under the Securities Act or any state securities laws and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act or any applicable state securities laws.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts contained in this press release may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “expects,” “plans,” “intends,” “anticipates,” “indicates,” “remains,” “believes,” “estimates,” “forecast,” “guidance,” “outlook,” “may,” “will,” “should,” “seeks,” “goals,” “targets” or the negative of these terms or other similar expressions. Forward-looking statements include, without limitation, statements related to the proposed completion and timing of the proposed offering, and the anticipated use of proceeds from the offering. Additionally, forward-looking statements include statements that do not relate solely to historical facts, such as statements which identify uncertainties or trends, discuss the possible future effects of current known trends or uncertainties, or which indicate that the future effects of known trends or uncertainties cannot be predicted, guaranteed, or assured. Forward looking statements contained in this press release include, without limitation, statements regarding JetBlue’s outlook and future results of operations and financial position, including potential EBIT improvement, JetBlue’s business strategy and plans for future operations, including JetBlue’s refreshed standalone strategies, such as JetForward, JetBlue’s sustainability initiatives, the impact of industry or other macroeconomic trends affecting JetBlue’s business, seasonality, and JetBlue’s expectations regarding the wind-down of JetBlue’s Northeast Alliance with American Airlines Group Inc. (the “NEA”) and the related impact on JetBlue’s business, financial condition and results of operations. Forward-looking statements involve risks, uncertainties and assumptions, and are based on information currently available to JetBlue. Actual results may differ materially from those expressed in the forward-looking statements due to many factors, including, without limitation, the risk associated with the execution of JetBlue’s strategic operating plans in the near-term and long-term; JetBlue’s extremely competitive industry; risks related to the long-term nature of JetBlue’s fleet order book; volatility in fuel prices and availability of fuel; increased maintenance costs associated with fleet age; costs associated with salaries, wages and benefits; risks associated with a potential material reduction in the rate of interchange reimbursement fees; risks associated with doing business internationally; JetBlue’s reliance on high daily aircraft utilization; JetBlue’s dependence on the New York metropolitan market; risks associated with extended interruptions or disruptions in service at JetBlue’s focus cities; risks associated with airport expenses; risks associated with seasonality and weather; JetBlue’s reliance on a limited number of suppliers for JetBlue’s aircraft, engines, and JetBlue’s Fly-Fi^® product; risks related to new or increased tariffs imposed on commercial aircraft and related parts imported from outside the United States; the outcome of legal proceedings with respect to the NEA and JetBlue’s-wind down of the NEA; risks associated with cybersecurity and privacy, including information security breaches; heightened regulatory requirements concerning data security compliance; risks associated with reliance on, and potential failure of, automated systems to operate JetBlue’s business; JetBlue’s inability to attract and retain qualified crewmembers; JetBlue’s being subject to potential unionization, work stoppages, slowdowns or increased labor costs; reputational and business risk from an accident or incident involving JetBlue’s aircraft; risks associated with damage to JetBlue’s reputation and the JetBlue brand name; JetBlue’s significant amount of fixed obligations and the ability to service such obligations; JetBlue’s substantial indebtedness and impact on JetBlue’s ability to meet future financing needs; financial risks associated with credit card processors; risks associated with seeking short-term additional financing liquidity; failure to realize the full value of intangible or long-lived assets, causing JetBlue to record impairments; risks associated with disease outbreaks or environmental disasters affecting travel behavior; compliance with environmental laws and regulations, which may cause JetBlue to incur substantial costs; the impacts of federal budget constraints or federally imposed furloughs; impact of global climate change and legal, regulatory or market response to such change; increasing attention to, and evolving expectations regarding, environmental, social and governance matters; changes in government regulations in JetBlue’s industry; acts of war or terrorism; and changes in global economic conditions or an economic downturn leading to a continuing or accelerated decrease in demand for air travel. It is routine for JetBlue’s internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that the internal projections, beliefs, and assumptions upon which we base JetBlue’s expectations may change prior to the end of each quarter or year.

Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. You should understand that many important factors, in addition to those discussed or incorporated by reference in this press release, could cause JetBlue’s results to differ materially from those expressed in the forward-looking statements. Further information concerning these and other factors is contained in JetBlue’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including but not limited to in JetBlue’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, as may be updated by JetBlue’s other SEC filings. In light of these risks and uncertainties, the forward-looking events discussed in this press release might not occur. JetBlue’s forward-looking statements speak only as of the date of this press release. Other than as required by law, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise.

About JetBlue Airways

JetBlue is New York’s Hometown Airline^®, and a leading carrier in Boston, Fort Lauderdale-Hollywood, Los Angeles, Orlando and San Juan. JetBlue carries customers to more than 100 destinations throughout the United States, Latin America, the Caribbean, Canada and Europe. For more information and the best fares, visit jetblue.com.

Source: JetBlue Airways Corporation

View source version on businesswire.com: https://www.businesswire.com/news/home/20240814026068/en/

JetBlue Investor Relations

Tel: +1 718 709 2202

ir@jetblue.com



JetBlue Corporate Communications

Tel: +1 718 709 3089

corpcomm@jetblue.com

Source: JetBlue

FAQ

What is the total amount of JetBlue's (JBLU) recent Loyalty Financings?

JetBlue's (JBLU) recent Loyalty Financings total $2,765 million, consisting of $2,000 million in senior secured notes and a $765 million Term Loan B.

When are JetBlue's (JBLU) newly issued senior secured notes due?

JetBlue's (JBLU) newly issued senior secured notes are due in 2031.

What is the interest rate on JetBlue's (JBLU) $2,000 million senior secured notes?

The interest rate on JetBlue's (JBLU) $2,000 million senior secured notes is 9.875%.

What collateral is securing JetBlue's (JBLU) Loyalty Financings?

JetBlue's (JBLU) Loyalty Financings are secured by collateral related to the company's TrueBlue® customer loyalty program.

When is JetBlue (JBLU) expected to close the Loyalty Financings?

JetBlue (JBLU) expects to close the Loyalty Financings on or about August 27, 2024, subject to customary conditions.