Business Context and Reporting Period
This Form 8-K Current Report was filed by Delta Air Lines, Inc. on March 12, 2020. The filing discloses the creation of a direct financial obligation through the issuance of equipment notes and pass-through certificates to refinance maturing debt.
Key Financial Metrics and Transaction Details
- Total Principal Amount: $1,000,000,000 in Equipment Notes and Pass Through Certificates.
- Debt Structure:
- Series AA: $795,894,000 at an interest rate of 2.000% per annum.
- Series A: $204,106,000 at an interest rate of 2.500% per annum.
- Collateral: The notes are secured by 33 aircraft (five Airbus A321-211, 22 Boeing 737-932ER, and six Airbus A330-302) delivered between August 2014 and April 2017.
- Payment Terms: Interest is payable semiannually beginning June 10, 2020. Principal payments commence December 10, 2020.
- Liquidity Facility: National Australia Bank Limited provided a liquidity facility sufficient to cover three semiannual interest distributions for each certificate class.
Material Changes and Use of Proceeds
The primary material change is the refinancing of existing debt. Delta will use the $1.0 billion proceeds from this issuance to repay in full the outstanding principal of its 2.875% senior unsecured notes due March 13, 2020. This transaction replaces unsecured debt with secured equipment notes at a lower weighted average interest rate.
Outlook, Risks, and Contingencies
- Default Provisions: Maturity of the Equipment Notes may be accelerated upon events of default, including failure to make payments or comply with covenants, as well as certain bankruptcy events.
- Security Interest: The notes are secured by a lien on the specific aircraft and are cross-collateralized by the other aircraft in the pool.
- Underwriting: The transaction was underwritten by Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC, with delivery of certificates made on March 12, 2020.
Investor Verification Checklist
- Verify the successful repayment of the $1.0 billion 2.875% senior unsecured notes on March 13, 2020.
- Confirm the specific aircraft registration numbers included in the collateral pool against the filed exhibits.
- Review the liquidity facility terms with National Australia Bank Limited to ensure coverage of interest obligations.
- Monitor compliance with covenants to avoid acceleration of the new secured debt.