JetBlue prices $2.77 billion of new debt a day after downgrades

JetBlue Airways Corp. priced $2.77 billion of bonds and loans on Tuesday after shifting the deal structure further into notes, as the recently downgraded carrier seeks to raise funds for general corporate purposes. 

The firm sold $2 billion of seven-year notes callable in three with a 10% yield and a $765 million five-year term loan, according to people familiar with the matter who asked not to be identified because the information is private. The transaction is backed by JetBlue’s loyalty program, a move several peers have done in recent years.

The average bond yield for single B rated companies was 7.45% on Tuesday, according to a Bloomberg index. Meanwhile, the new loan’s margin is 550 basis points above the Secured Overnight Financing Rate, issued at a discount of 98 cents on the dollar, one of the people said.

JetBlue, which is also selling at least $400 million of five-year convertible notes, kicked off the debt deals on Monday. 

But shortly after they were unveiled, both Moody’s Ratings and S&P Global Ratings downgraded the carrier to one notch above triple C levels. Falling out of the single B range would limit potential purchases by collateralized loan obligations, the biggest buyers of leveraged loans. For its part, S&P said JetBlue’s debt plan and a lowered forecast “considerably weaken credit metrics.”

Shares fell 4.8% Tuesday, closing at their lowest level since Nov. 30.

JetBlue is pivoting to focus more on leisure customers in New York, New England, Florida and Puerto Rico — areas where it historically has had strong operations. The firm has cut more than 50 routes to reduce unprofitable flying.